Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Avalon Re catastrophe bond maturity extended yet again

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Once again Standard & Poor’s have announced that the maturity date for Oil Casualty Insurance Ltd’s Avalon Re catastrophe bond notes has been extended. This is to allow further loss reporting to develop and be reported as it seems the full extent of losses suffered by this cat bond deal are still not fully known. The notes have been extended to 9th September 2009, adding another three months of uncertainty for those invested in or at risk of loss from this particular insurance linked security.

Losses to Avalon Re have not changed but their are still claims which are developing which have the potential to impact it. The Class C notes are already known to be likely to incur losses due to the claims already in place having exceeded the initial attachment point of $300m. However two further insured claims, a spill at an oil refinery in Lake Charles and a number of claims relating to lead paint exposure liabilities are still developing and could cause the Class B notes to incur losses.

We expect this deal to go the distance to it’s final maturity date of 7th June 2010 at which point it is highly likely that bondholders will be hit for claims above the attachment points. We’ll keep you updated as further developments with Avalon Re occur.

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