Aetna, the health insurance arm of CVS Health, completed a $200 million deal with Vitality Re X for collateralized reinsurance.
Each year, Aetna goes to the insurance-linked securities market with a catastrophe bond structure that can transfer risk of increasing medical benefit insurance claims to capital markets. This allows Aetna to maintain an efficient source of reinsurance and capital, according to Artemis.
"The transactions allow the health insurer to reduce its required capital and have become a regular and valued part of its capital stack, adding efficiency and at reduced costs compared to traditional reinsurance, which the firm buys plenty of anyway," according to the report.