S&P affirms five natural catastrophe bond ratings

by Artemis on August 19, 2014

Standard & Poor’s Ratings Services (S&P), the most active credit rating agency in rating catastrophe bond issues, has affirmed the ratings of five more natural catastrophe bonds, from three issuers, after each underwent its annual reset.

Annually, every outstanding catastrophe bond is typically scrutinised and analysed by S&P, or by the rating agency responsible, to assess whether the probability of attachment remains within the expected range specified in the deals offering documentation and within the bounds expected of its rating.

This analysis occurs during the annual reset and also takes into account any qualifying losses suffered to date by a cat bond, any changes to the underlying portfolio of risk as well as any difference in expectations, or perceived risk, for the cat bond due to the shortened time to maturity.

In the case of these five tranches of catastrophe bond notes, S&P said that the probability of attachment was reset to a percentage consistent with the cat bonds transaction documents and the current rating for the transaction.

In addition S&P also reviewed the creditworthiness of each of the ceding companies (or sponsors) as well as the ratings on the collateral held in trust that, as long as there are no loss events, would be used to redeem the cat bond principal on the redemption date.

A list of the five affirmed catastrophe bonds, along with links to more details from the Artemis Deal Directory on each transaction and the rating of each tranche of cat bond notes, can be found below.

Compass Re Ltd. (Series 2011-1)
– Series 2011-I Class 1 BB-(sf)
– Series 2011-I Class 2 BB-(sf)
– Series 2011-I Class 3 B+(sf)

Embarcadero Re Ltd. (Series 2012-2)
– Series 2012-2 Class A BB+(sf)

Northshore Re Limited (Series 2013-1)
– Class A BB-(sf)

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This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the record second-quarter of 2014, looking at the new risk capital issued and the composition of the transactions completed during Q1 2014.
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