Swiss Re Insurance-Linked Fund Management

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Moody’s expects minimal losses on Japan exposed catastrophe bonds


Moody’s Investor Services has some updated commentary regarding the four catastrophe bonds that are exposed to Japanese earthquakes which they have ratings for. The commentary in their ABS, ABCP & Covered Bond Quick Check report published today, suggests that the four cat bonds they rate could escape with zero or minimal losses.

Two of the cat bonds Moody’s rates are the Vega Capital Ltd. Series 2008-1 and Vega Capital Ltd. Series 2010-1 transactions issued on behalf of Swiss Re. On these two deals Moody’s said:

Vega Capital Ltd. Series 2008-1 and Vega Capital Series 2010-1 will not experience losses directly associated with this event. This is because these are multi-event cat bonds, i.e., two or more different events are needed in order to trigger losses to investors.

On the Valais Re Ltd. catastrophe bond issued on behalf of Flagstone Re Moody’s said:

Valais Re Ltd, scheduled to mature in early June, is an indemnity transaction that could be exposed to principal losses due to this event. However, the sponsor’s portfolio is mostly concentrated around large cities like Tokyo, and because of this, losses to the sponsor are expected to be below the cat bond attachment level.

On the Muteki Ltd. cat bond issued on behalf of Japanese cooperative Zenkyoren via reinsurer Munich Re Moody’s said:

Muteki Ltd. Series 2008-1, scheduled to mature at the end of May, is a parametric transaction. Potential losses to investors are tied to the value of a parametric index that is overweighed around Tokyo. In spite of the marge magnitude of this event, our expectation is that the value of the index will be, at most, closer to the attachment point rather than to the exhaustion point (i.e., losses are expected to be either zero or if any, very small).

It will still be some days before the final outcome for these catastrophe bonds is known. all of the catastrophe bonds with Japanese earthquake exposure, and therefore exposure to the 11th March disasters in Japan, are listed here.

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