Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Swiss Re to redeem Vita Capital IV Ltd. Series I Class E in February


Back in December we wrote that reinsurer Swiss Re had planned to redeem two tranches of mortality catastrophe bond notes issued through its Vita Capital IV Ltd. vehicle. It turns out we’d jumped the gun on one of those and according to a clarification published by rating agency S&P the $75m Series I Class E notes issued by Vita Capital IV will officially be redeemed on the 25th February.

In our December article we wrote that both the $75m Vita Capital IV Series 1 notes, which were issued in November 2009, and the $50m Series II issuance, which came to market in May 2010, were to be redeemed. S&P withdrew the rating for the Series I Class E notes on the 25th January but have now reinstated the rating saying that the redemption will actually occur on the 25th February.

The update from S&P does not mention the Series II Class E notes. It is possible that their redemption will also be in February, but we cannot confirm that.

The reason for the redemption of the $125m Vita Capital IV notes has not been disclosed, but it is likely that the coupon paid to investors for the risk transfer is higher than the coupon would be if the deal was issued today, due to this type of risk being discounted in the current market environment versus when it was issued. Therefore redeeming the notes and finding the cover for the mortality risk elsewhere, either in the traditional markets or maybe as another cat bond type deal, would make perfect sense for the sponsor.

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