Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Avalon Re catastrophe bond maturity extended (again)


The maturity date of the Avalon Re catastrophe bond from Oil Casualty Insurance Ltd has been extended extended again according to Standard & Poor’s. The original terms of the deal allowed for it to be extended by a period of three months up to eight consecutive times from the original maturity date depending on the potential for losses.

Standard & Poor’s now reports that after this latest extension, maturity is now expected on the 9th June 2009. The deal keeps getting extended as the estimated net losses to Avalon Re keep getting closer to the trigger or attachment point. Paid and reserve losses attributed to the deal amount to $347m now; $147m for hurricane Katrina and reserves of $200m for the Buncefield oil depot explosion and a steam pipe explosion in New York in July 2007. Ratings of both the Class B and C tranches of notes have not been changed and remain ‘CCC’ and ‘CC’ respectively.

The deal can be further extended an additional four times up to the 8th June 2010 and is likely to be until final losses are fully calculated, note holders continue to receive interest during the extension period. Investors must however be on tenterhooks as the further this deal gets extended the higher the expectation of a loss to both Class B and C note holders becomes.

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