Moody’s has downgraded the ratings of one tranche of the Nelson Re Ltd. catastrophe bond transaction and placed two other tranches on review for possible downgrade. The June 2008 cat bond issued on behalf of Glacier Re is a $180m three year deal.
The downgrade follows and announcement by Glacier Reinsurance that it expects the Class G notes of the deal to attach as a result of the developing losses coming from hurricane Ike which hit the U.S. last year. Losses continue to be reported by companies ceding to Glacier Re and the assumption right now is that the notes will attach, although how large the losses will be is still unknown.
So it looks like we will have a very rare loss to notes in the catastrophe bond market. It’s not a complete surprise to hear that this is due to hurricane Ike as losses have been much larger than initially thought.
Moody’s has also placed two other tranches of the deal (Class H and I notes) on review for possible downgrade although not for the same reason. It says that this action is due to recent organisational changes at Glacier Re and the uncertainty this has caused.