The final losses attributable to the Nelson Re Ltd. catastrophe bond, which was issued on behalf of sponsor Glacier Re (who are now in run-off) back in 2008, are becoming clearer today after Moody’s issued a ratings affirmation and update regarding the transaction. Nelson Re was impacted by losses from 2008’s hurricane Ike which caused significant damage across the state of Texas.
Moody’s say they have affirmed the ratings on the $67.5m Nelson Re Ltd. Class G notes with a developing outlook for the tranche at risk of losses. This affirmation is a result of a newly submitted proof of loss and reduced interest event certificate from Glacier Re which estimates the ultimate net loss from Ike at $174,566,072.
That figure implies a loss of principal on the Class G notes of 39.4% which means investors will recover 60.6% of the $67.5m. Previously, based on the loss estimates and information it had at the time, Moody’s had estimated that the investors would only recover less than 60% of the principal.
So that equates to just under $27m which could be paid out to Glacier Re towards covering the near $175m loss. Moody’s notes that the developing outlook they have placed on the notes means that ultimate net losses could be worse, or better as Ike claims continue to develop. So the final total is not known yet, Nelson Re officially matured in June but will run for some time until loss development is complete, but the final loss and how much money will be recouped by investors is certainly becoming better understood.
Read our previous coverage of the Nelson Re catastrophe bond.