Health insurer Aetna has entered into a three-year reinsurance arrangement with Vitality Re VI 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.
This follows the expiration of Aetna’s reinsurance arrangements with Vitality Re III on January 7, 2015.
Vitality Re VI is a newly formed insurance company which issued health insurance-linked notes in a private offering in connection with this transaction.
“Today’s transaction, which essentially replaces the Vitality Re III arrangement, marks the successful completion of our sixth such reinsurance arrangement,” said Aetna’s treasurer David Buda. “This reinsurance arrangement improves our capital efficiency and reduces our weighted average cost of capital.”