Moody’s downgrades Avondale life insurance-linked securities

by Artemis on December 23, 2010

Earlier this month we wrote that Moody’s Investor Services had placed the senior tranche of notes from the Avondale Securities SA life insurance-linked securities on review for potential downgrade due to their close link to Ireland and the Bank of Ireland (who are facing economic difficulties). Now Moody’s has taken the next step and downgraded the rating on the notes.

The senior tranche of the transaction, €380m of Class A-1 life insurance-linked notes, were issued by Avondale Securities, a special purpose vehicle set up in Luxembourg by the Bank Of Ireland, and were designed to transfer a block of life insurance risk to the capital markets through securitisation.

Moody’s says that the economic difficulties faced by the Bank of Ireland and downward pressure on their asset portfolios quality affects their economic capitalisation and as a result can affect the value-in-force of the securitised book of life business.

Moody’s have downgraded the senior tranche from ‘A3’ to ‘Baa2’ and keep them on review for further possible downgrades.

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