Swiss Re, the world’s second-biggest reinsurer, has raised $275 million to help it pay claims in the event of pensioners in Canada, Australia and the United States living longer than budgeted for by their insurers, it said on Tuesday (31)

Swiss Re raised the cash by selling insurance-linked securities to capital markets investors through its Cayman Islands-based Vita Capital V vehicle.

The issue brings the total amount of longevity protection raised by Swiss Re through the insurance-linked securities market to $2.25 billion in the last three years, the reinsurer said.

“The continuing success of each Vita placement demonstrates its effectiveness in managing Swiss Re’s capital and peak risk exposure, which further increases our ability to meet client needs,” said Swiss Re Chief Underwriting Officer Matthias Weber.

Insurers in the industrialised world have been hit by spiralling costs as pensioners outstrip their expected lifespans, helped by medical advances and lifestyle changes.

This has prompted many insurers and pension funds to protect themselves against longevity increases by reinsuring their pension liabilities or transferring them outright to specialist pension buyout firms.

The securities sold through Swiss Re’s Vita offer investors an income in return for agreeing to pay some of the reinsurer’s costs if the pensioners on its books live longer than expected.

They have the same structure as catastrophe bonds, used by insurers as a form of protection against hurricane and earthquake claims.

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