Willow Re Ltd. – Full details:
Under the reinsurance agreement, the issuer will provide Allstate with up to $250 million of aggregate protection over a three-year period beginning June 15, 2007, when the event index value caused by a U.S. hurricane event occurring in the Northeast territory (defined as Connecticut, New Jersey and New York) exceeds a specific attachment point.
Calculation of the event index value amount is formula-driven, which takes into consideration specific state payout factors; the industry loss amount applicable to the covered event as published by the Property Claim Services (PCS), a provider of catastrophe information for the property/casualty insurance industry; and a pre-determined automobile loss gross-up factor.
In exchange for receiving the multi-year reinsurance coverage, Allstate will make periodic premium payments to the issuer.
Update: The collapse of the Lehman Brothers in 2008 left the Class B tranche of Willow Re Ltd. notes without a viable total return swap counterparty. The rating on Willow Re Ltd.’s Class B 2007-1 series notes was downgraded to ‘D’ from ‘CC’. An interest payment was due February 2nd. There’s a five day grace period before default is called but Allstate notified S&P to say that it does not expect to have sufficient funds to make the interest payment.