Ratings agency Fitch Ratings have finally downgraded the ratings or Signum Finance Cayman Ltd. Series 2010-09, a life securitization type transaction which provides Goldman Sachs with a mortality hedge for a defined block of life insurance. The Signum Finance deal has been threatened for a while and Fitch placed the ratings on watch negative back in October.
As before, the reason this transaction has received rating agency attention is not down to any change in the mortality expectations of the covered defined block of life insurance under the excess mortality swap agreement, rather it is due to the fact that Goldman Sachs plays such a large role in the transaction. Goldman Sachs, as guarantor of the swap counterparty Goldman Sachs International, is seen as the highest risk-presenting factor in the transaction.
Fitch downgraded Goldman Sachs issuer rating to ‘A’ and followed this by downgrading the $200m of Signum Finance Cayman Limited series 2010-09 notes to ‘Asf’ from ‘A+sf’.
Under this novel transaction Signum Finance (the SPV) will provide mortality protection on a defined block of U.S. level-term life insurance policies and will make payments to Goldman Sachs in the event the mortality experience of the block of life policies exceeds a trigger point.