Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

A.M. Best affirms ratings of Montana Re Ltd. 2009-1 catastrophe bond


Ratings agency A.M. Best has revisited the Montana Re Ltd. Series 2009-1 catastrophe bond transaction to assess whether any change to the deals ratings was required. Ratings agencies often do this as cat bonds move closer to maturity and Montana Re is due to mature in December this year. A.M. Best concludes that no ratings change is necessary and affirmed the ratings of ‘B’ on the $100m Class A notes and ‘CCC’ on the $75m of Class B notes.

The $175m of notes issued by Montana Re 2009 provide reinsurer Flagstone Re with a source of multi-year fully collateralized protection against U.S. hurricanes and earthquakes on a per-occurrence basis using a modified industry loss index trigger from PCS. The $100m of Class A notes cover hurricanes only while the $175m Class B notes cover both hurricanes and earthquakes.

A.M. Best says that there is no change in the perceived risk underlying  the securities issued by Montana Re and that no qualifying catastrophe events have occurred since they last looked at the ratings one year ago.

When the rating was reviewed last year both tranches of Montana Re 2009 were downgraded by A.M. Best due to changes in increases in the attachment probability of the notes when re-modeled using the new RMS v11 hurricane model.

With just about five months left on risk for the Montana Re cat bond investors will hope that the deal remains unscathed, although with much of the hurricane season left to run that is not guaranteed.

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