Aetna uses ILS structure as capital management tool

Aetna, the healthcare benefit company, has entered into a four-year reinsurance arrangement with Vitality Re VII as part of its long-term capital management strategy.

The arrangement allows Aetna to reduce its required capital and provides $200 million of collateralised excess-of-loss reinsurance coverage on a portion of Aetna’s group commercial health insurance business.

Vitality Re VII is a newly formed insurance company which issued health insurance-linked notes in a private offering in connection with this transaction.

“Today’s transaction marks the successful completion of our seventh such reinsurance arrangement,” said David Buda, treasurer, Aetna.

“This reinsurance arrangement improves our capital efficiency and reduces our weighted average cost of capital.”