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S&P confirms Mariah Re Ltd. Series 2010-1 notes 100% loss of principal


As expected, ratings agency Standard & Poor’s have published a press release confirming the 100% loss of principal to the noteholders of the Mariah Re Ltd. Series 2010-1 U.S. tornado catastrophe bond. We broke the news early this morning that the Mariah Re 2010-1 cat bond notes were likely a total loss after the payout factors for one of the covered events changed, which in turn made the covered loss total jump dramatically.

S&P’s announcement states that it was an update to Catastrophe Series 42 which significantly increased the loss amount related to that event. The payout factor changed for Kansas, from non-metro to metro, as we discussed in our earlier article. This increased the loss from that specific tornado catastrophe event by just over $118m bringing total covered losses under Mariah Re to $954.6m.

Mariah Re Series 2010-1 attached at $825m up to an exhaustion point of $925m which has now been exceeded by $29.6m making this a total loss. Investors in this deal have now lost 100% of their principal and Mariah Re sponsor American Family Mutual Insurance Co. will eventually receive the monies to contribute towards their claims payments.

S&P say that they will lower the rating on the single tranche of Mariah Re Series 2010-1 notes to ‘D’ when the next interest payment is due on the 31st Dec 2011.

So, the Mariah Re story comes to a close, with both series of notes now fully exhausted. It took the most severe U.S. tornado season in many years (or some would say on record) to trigger and exhaust these cat bonds, clearly demonstrating when cat bond coverage comes into its own by providing cover for multiple peak peril events over an entire season.

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