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Swiss Re obtains $75 million of extreme mortality risk protection through new Vita Capital programme

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Swiss Re today announced the transfer of USD 75 million of extreme mortality risk in the U.S. and UK to the capital markets through a new VITA securitisation programme.

Swiss Re has entered into a transaction with VITA Capital IV Ltd. (“Vita IV”) to receive up to USD 75 million of payments in the event of severe population mortality in United States or the United Kingdom.

The agreement covers a five-year risk period starting in the issuance year and ending in 2014. Vita IV, in turn, has issued notes linked to this risk into the capital markets. The notes are rated “BB+” by Standard & Poor’s.

This is a continuation of Swiss Re’s hedging strategy, enabling the company to manage extreme mortality exposures in a capital-efficient manner.

Swiss Re’s Chief Underwriting Officer, Brian Gray, commented: “This Vita transaction will help us to manage our exposure to peak mortality risk in a capital efficient way, to meet increased client demand for extreme mortality risk protection and, ultimately, to position us for further growth.”

Swiss Re Capital Markets acted as sole manager and bookrunner on the note issuance. Collateral for the Vita IV notes will initially consist of securities issued by the International Bank of Reconstruction and Development. Risk modelling and analysis was performed by Risk Management Solutions, Inc.

Swiss Re has a history of securitizing its life risks, obtaining over USD 1.4 billion in extreme mortality risk protection in its predecessor Vita programmes.

Notwithstanding the current media focus on the H1N1 virus, the Vita IV notes offering was a successful placement for Swiss Re. Christian Mumenthaler, Head of Swiss Re’s Life & Health business commented: “This transaction is another example where we sustain our leadership in the life securitisations market.”

The Vita IV notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.