Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Bay Haven Ltd. catastrophe bond gets ratings boost


In September 2006, Catlin issued a catastrophe bond through SPV Bay Haven Ltd to protect itself against a range of natural catastrophe risks (US hurricanes, US earthquakes, UK and European windstorms, Japanese typhoons and Japanese earthquakes). The $200m deal was structured in two tranches of Class A and Class B notes.

Standard & Poor’s has just raised the rating of the $66.75m Class B notes to ‘A’ from ‘BBB+’. “The Class B notes risk a loss of principal upon the occurrence of a fourth triggered risk event during the three-year tenor of the transaction,” said Standard & Poor’s credit analyst Gary Martucci.

The deal was structured over 3 years, 2 years and 2 months of which has run. The Class B notes risk a loss of principal if there is a fourth triggered risk event during the three year period. Given that there is only 10 months left to run that risk has reduced considerably and with it the probability of attachment.

No action was taken on the Class A notes which are already rated ‘AA’, the highest rating S&P give to cat bonds.

News like this can only be good for the catastrophe bond market and help to encourage investors to get involved. The broad spread of risks covered by Bay Haven Ltd. has helped to demonstrate why it was considered to be the first of its kind to offer very low-risk/low-volatility investors, such as pension funds and life insurers, the diversification and yield benefits of natural catastrophe exposure.

You can read about Bay Haven Ltd. and most other catastrophe bonds in our Deal Directory.

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