Metlife, Hartford default swaps trade upfront

NEW YORK (Reuters) - Credit default swaps on insurance companies Metlife Inc (MET.N) and Hartford Financial Services Group (HIG.N) began trading on an upfront basis again on Thursday, indicating increasing concerns over their credit quality.

The cost to insure Metlife's debt rose to around 10.5 percent the sum insured as an upfront sum, or $1.05 million to insure $10 million in debt for five years, in addition to annual premiums of 5 percent, according to Markit Intraday.

The swaps had closed on Wednesday at a spread of around 717 basis points, or $717,00 per year for five years to insure $10 million in debt, according to Markit.

Hartford's swaps jumped to an upfront cost of 9.5 percent, after closing at a spread of 686 basis points on Wednesday, Markit data showed.

Credit default swaps trade on an upfront basis when a company's debt is considered distressed and sellers of protection want to be paid more at the outset of the contract due to higher perceived risk of the firm defaulting on its debt.

Credit default swaps on the insurers had traded for an upfront cost last week after U.S. Senate Majority Leader Harry Reid, a Nevada Democrat, said the failure of the government financial bailout could lead to a insurance company failure.

Since then, the swaps had retraced back to trading on a spread basis.

(Reporting by Karen Brettell; Editing by Kenneth Barry)