Swiss Re redeems Matterhorn mortality cat bond early, to return $46.9m principal to investors

Swiss Re has made an early redemption of the loss exposed Class A notes from its Matterhorn Re Ltd. (Series 2020-2) catastrophe bond issuance after benefiting from roughly $33.1 million in recoveries under their retrocessional protection, leaving the remaining $46.9 million of principal set to be returned to investors, Artemis understands.

Recall that the global reinsurance company had been benefiting from reinsurance recoveries under the mortality retrocession arrangements associated with two of its catastrophe bonds over the last two years, as these insurance-linked securities responded when Swiss Re’s mortality loss experience would have been rising.

The mortality cat bonds that Swiss Re has sponsored have all utilised mortality index triggers, with these designed to reflect rising mortality losses that would be expected to drive rising claims to the reinsurer. Making these a valuable form of retrocessional protection for the company.

Swiss Re had already been anticipating a 100% recovery of the $120 million of principal from its Vita Capital VI Limited (Series 2021-1) mortality catastrophe bond.

That cat bond had its notes marked down at zero in the secondary market for a long time now after mortality experience raised the index above the trigger attachment and exhaustion points. The Vita Capital VI notes are due to be matured as of late last week and with no changes seen in recent months the outstanding principal remained zero at the time, indicating a full recovery under the protection is presumed to have been made some time ago by Swiss Re.

But the other mortality cat bond that Swiss Re had in-force and that was known to be exposed to losses was the $80 million Class A tranche of notes from the Matterhorn Re Ltd. (Series 2020-2) issuance.

The Matterhorn Re 2020-2 Class A notes provided similar mortality retro reinsurance protection for Australia, Canada and the UK, on a mortality index trigger basis, although also covered northeast U.S. named storms on an industry loss trigger basis as well.

When we last reported on these mortality deals in March 2024, calculation updates suggested that Canadian mortality exposure had triggered an expected 38.56% reduction in the notional outstanding, with that reduced to $49.15 million, equating to a roughly $30.85 million recovery that Swiss Re was set to make under the Matterhorn Re notes.

We now understand from sources that Swiss Re made a further small reinsurance recovery under the Matterhorn Re 2020-2 Class A notes as mortality experience in the covered regions as measured by the index trigger worsened.

That additional $2.2 million reinsurance recovery under the Matterhorn Re 2020-2 Class A notes was reportedly made early in January 2025, which reduced the amount of risk capital outstanding under the notes to just over $46.9 million.

Which took Swiss Re’s reinsurance recovery under the Matterhorn Re mortality cat bond notes to approximately $33.1 million.

As a result, total mortality cat bond recoveries made by Swiss Re across the Vita Capital VI and Matterhorn Re 2020-2 issuances rose to roughly $153.1 million.

We’ve now also been told that Swiss Re has opted to activate an early redemption for the Matterhorn Re 2020-2 Class A notes, one year earlier than their scheduled redemption date which had previously been extended to January 2027.

We’re told the remaining just over $46.9 million of outstanding principal from the notes is set to be returned to investors in the Matterhorn bond and that the notes have now been matured.

The early redemption of the notes that had already had their maturity date extended suggests Swiss Re recognising that no further retro reinsurance recoveries would be made under them, so the remaining invested capital could be returned and redistributed back to the noteholders.

With these two mortality catastrophe bonds having been redeemed now, there are no other mortality cat bonds left outstanding in the market at this time.

While there remain plenty of large life insurers and reinsurers that could benefit from efficient mortality reinsurance or retrocessional protection from the capital markets, the catastrophe bond has fallen out of favour for this use-case, most likely due to the low-cost and heavy availability of traditional reinsurance capital for the mortality peril.

Both of these mortality cat bonds are included in our directory of cat bonds defaulted, triggered or deemed at-risk of attaching.