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Report: Aetna sets up $200M medical benefit claims ratio-linked catastrophe bond

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Report: Aetna sets up $200M medical benefit claims ratio-linked catastrophe bond

Aetna Inc. has registered a special purpose vehicle for a $200 million medical benefit risk insurance-linked securities transaction, Artemis reported.

The Cayman Islands-based vehicle, Vitality Re X Ltd., will issue two tranches of series 2019 notes. The $140 million class A tranche of notes will cover Aetna for medical benefit claims losses from a medical benefit ratio attachment point of 104%, equivalent to an indemnity loss under the reinsurance of $1.04 billion, up to a medical benefit ratio exhaustion at 118%, equivalent to $1.18 billion. This tranche has a modeled attachment probability equivalent to 0.04% and expected loss of less than 0.01%, the insurance-linked securities blog reported.

The $60 million class B tranche will cover losses from a medical benefit ratio of 98%, equivalent to an indemnity loss under the reinsurance of $980 million, to 104%, equivalent to $1.04 billion. This tranche has an initial attachment probability equivalent of 0.43% and an expected loss of 0.17%, according to the report.

Under the transaction, Aetna Life Insurance Co. will also enter into a quota share reinsurance agreement with Vermont captive Health Re Inc. Health Re will then enter into two excess of loss reinsurance agreements with Vitality Re X.