Swiss Re Insurance-Linked Fund Management

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Swiss Re’s Vita Capital mortality bond settles at $120m, priced on target


Swiss Re has successfully upsized its new Vita Capital VI Limited (Series 2021-1) mortality catastrophe bond transaction to $120 million, just below its revised upper-end target for the deal.

swiss-re-building-imageThe global reinsurance giant had returned to the catastrophe bond market with a new excess, or extreme, mortality cat bond transaction back in June.

At the cat bonds launch to investors, Swiss Re was seeking at least $75 million of mortality retrocessional reinsurance from the transaction.

A positive response from investors then saw the deal target increasing, to between $100 million and $125 million of extreme mortality protection.

In the end, we’re told that Swiss Re has settled for $120 million of extreme mortality protection with this new catastrophe bond deal, with pricing on-target with its initial marketing of the notes.

It is perhaps a little surprising the transaction did not achieve the upper target, seeing as only $5 million of additional commitments were required from the ILS investor base, for who this might have been an interesting diversifier.

But, as the first mortality cat bond to explicitly include coverage for COVID-19 deaths, even though only from 2022, this may have affected demand for the notes somewhat.

So, Vita Capital VI Limited, Swiss Re’s Cayman Islands based special purpose vehicle, has now issued a single tranche of Class B notes, sized at $120 million.

It’s an efficient slice of capital markets backed retro reinsurance protection for Swiss Re’ mortality exposed life book of business, as the Vita Capital deals provide a source of excess (or extreme) mortality retrocessional reinsurance protection, based on a mortality index trigger.

The $120 million of notes can be triggered by an extreme mortality event which raises a mortality index, weighted by age and gender, above a predefined trigger point.

It covers 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 we’ve explained before, mortality from the COVID-19 pandemic is excluded for the calendar year 2021, but included beyond that.

The $120 million of Series 2021-1 Class B notes to be issued by Vita Capital VI Ltd. have an initial attachment probability of 1.06%, an initial exhaustion probability of 1.16% and an initial expected loss of 0.75%.

These mortality cat bond notes were first marketed to investors with a suggested coupon of 3% and that is where the deal settled at its higher $120 million size

You can read all about this new Vita Capital VI Limited (Series 2021-1) transaction from Swiss Re and every other catastrophe bond issued in our Artemis Deal Directory.

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