Swiss Re obtains US$705 million of extreme mortality risk protection

Swiss Re has transferred US$705 million of extreme mortality risk to the capital markets through its Vita Capital securitization program, according to a press release. This is Swiss Re’s third mortality catastrophe bond that has been issued privately to institutional investors. Part of the issuance will be used to replace cover provided by Swiss Re’s first Vita issuance, which expired at the end of 2006, with the balance providing additional protection against extreme mortality risks.
A securitization program allows assets to be converted into marketable securities that can be sold to investors.
“This securitization enables Swiss Re to manage peak mortality exposures in a sustainable and capital-efficient manner,” said Swiss Re’s CEO, Jacques Aigrain. “[It] is another example of how Swiss Re is addressing its strategic objective of reducing earnings volatility.”
In the event of severe population mortality in the United States, United Kingdom, Germany, Japan and Canada, Swiss Re could receive up to US$705 million of payments.
The structure of the risk coverage is based on combined mortality index that applies predetermined weights to the annual general population mortality in these countries. As the protection buyer under the transaction, Swiss Re receives payments from Vita Capital III if, during any two-year measurement period within the risk coverage period, the combined mortality index exceed predefined percentages for the base year’s mortality level.