In a statement the insurer said the agreement allows Aetna to reduce its required capital and provides $150 million of collateralised excess of loss reinsurance coverage on a portion of Aetna’s group commercial health insurance business.

Vitality Re is a newly formed insurance company which issued the industry’s inaugural health insurance-linked notes in a private offering in connection with this agreement.

 “I am pleased to announce the successful completion of this transaction, which allows Aetna to free up capital held with respect to the covered business, and deploy it accretively for other purposes,” said Joseph Zubretsky, senior executive vice president and Chief Financial Officer. “Through this innovative transaction, we have improved our capital efficiency, enhanced our financial flexibility and reduced our weighted average cost of capital. We expect this to be the first step in a larger program.”