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Mariah Re Ltd. Series 2010-1 catastrophe bond covered losses rise further


Yesterday we wrote about Standard & Poor’s recent update on the status of covered losses under the terms of the Mariah Re Ltd. Series 2010-1 severe thunderstorm catastrophe bond. The cat bond has been accumulating losses from the severe spate of thunderstorms and tornadoes which affected the U.S. over the last few months. The figure published in our article yesterday is already outdated as S&P have received a new update on losses from one of the covered catastrophe events.

S&P have received an updated loss amount for Catastrophe Series 42. The estimate of losses from this specific event rose from $96.02m to $125.5m bringing the new total loss up to the 31st July figure for Mariah Re to $726.9m (we reported it yesterday as $697.46m).

S&P now say that this new accumulated covered loss total is in line with a rating of ‘CCC+’, where as their previous update suggested that the run rate of losses was still consistent with the original rating given to Mariah Re Ltd. Series 2010-1 of ‘B’. This change of assessment doesn’t reflect a downgrade but does reflect a lowering in the confidence of S&P that Mariah Re might escape losses.

The initial attachment point for Mariah Re is $825m, meaning that the cat bond can accumulate a further $98.1m of covered losses before investors face a loss of principal.

S&P are still waiting for a report for Catastrophe Series 58 and for updates to earlier covered events. They still anticipate that they will receive all those updates by the end of September and will keep Mariah Re’s rating on a CreditWatch developing status until the final covered loss figure is fully understood.

The future looks less certain for this Mariah Re cat bond transaction and investors will be getting nervous about the estimates still to come and to be updated. In reality, it wouldn’t be that surprising if Mariah Re investors faced some loss of principal given the severity of the U.S. tornado and severe thunderstorm season this last few months. In fact it could be seen as another example of a cat bond acting as expected/designed.

We’ll update you when we have more news on the fate of this cat bond.

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