S&P warns Vitality Re transactions could be at risk from COVID-19

A significant increase in claims payments from Health Re, the captive of Aetna Life Insurance, related to COVID-19, could trigger losses for a number of Vitality Re ILS transactions, S&P Global Ratings has warned.

An increase in claims payments would trigger payments from the Vitality Re ILS structures to Health Re, if those claims rise above a certain level for a calendar year. If that happens, S&P warned the rating on the notes would be impacted.

“The increase would need to produce medical benefits ratios (MBRs) that exceed the MBR attachment points for any of the notes for the 2020 annual risk period,” S&P said in a note.

It added: “We believe it would take a severe morbidity stress to trigger even the class B notes,” and stressed its ratings for the notes in question have not been changed at this point.

The ILS in questions includes: Vitality Re notes VIII, IX, X and XI.