Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Swiss Re lifts Vita Capital mortality cat bond upper target to $125m


Global reinsurance giant Swiss Re is aiming to upsize its new Vita Capital VI Limited (Series 2021-1) mortality catastrophe bond transaction, with the targeted issuance now lifted to between $100 million and $125 million of extreme mortality protection, we’re told.

swiss-re-building-logo-newSwiss Re returned to the catastrophe bond market with a new excess or extreme mortality transaction just over a week ago.

At the time, the reinsurance firm was aiming to secure at least $75 million of mortality retrocessional reinsurance with the transaction, but thanks to another positive response from the cat bond investor-base it looks like this will increase.

Vita Capital VI Limited, Swiss Re’s Cayman Islands based special purpose vehicle, is now aiming to issue a single tranche of Class B notes, sized at between $100 million and $125 million.

Which suggests the mortality cat bond issue could increase in size by as much as two-thirds, benefiting Swiss Re with an enlarged slice of capital markets backed retro reinsurance protection for its mortality exposed life book of business.

Once completed, the Vita Capital VI mortality cat bond will provide Swiss Re with a source of excess (or extreme) mortality retrocessional reinsurance protection, based on a mortality index trigger.

Meaning that the notes could be triggered by an extreme mortality event which raises a mortality index, weighted by age and gender, above a predefined trigger point.

This mortality cat bond will cover certain mortality losses in Australia, Canada, the UK and the United States for Swiss Re, across a term from the beginning of 2021 to the end of 2025, with the notes maturity slated for early 2026, so offering five years of coverage.

As previously explained, mortality due to the COVID-19 pandemic is excluded for the calendar year 2021, but included beyond that.

Hence this could be the first mortality cat bond to cover an increase in mortality caused by the COVID-19 coronavirus, although of course with vaccines taking hold across many developed nations such as those covered by this deal, the risk from next year onwards is anticipated to be greatly reduced.

The now $100 million to $125 million of Series 2021-1 Class B notes to be issued by Vita Capital VI Ltd. will have an initial attachment probability of 1.06%, an initial exhaustion probability of 1.16% and an initial expected loss of 0.75%.

This mortality cat bond was first marketed to investors with a suggested coupon of 3% and we understand from sources that this has not changed at the latest update.

We’ll keep you updated as this new Vita Capital VI Limited (Series 2021-1) transaction from Swiss Re comes to market and you can read about this and every other catastrophe bond issued in our Artemis Deal Directory.

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