Standard & Poor’s Ratings Services today has removed its ratings on 10 natural peril catastrophe bonds from CreditWatch with negative implications. S&P also said it has lowered its “ratings on six of the bonds and affirmed our ratings on four” (Bonds affected are listed below).
S&P noted that it had placed the ratings on 16 catastrophe bonds on CreditWatch negative on April 18, as a result of the “impact of the update to Risk Management Solutions’ (RMS’) RiskLink V11 U.S. hurricane model. These bonds had been modeled with an earlier version of the RMS model.”
S&P explained that it has now “received the updated probability of attachment for 10 of the 16 bonds based on RMS’ updated model.” In addition, it has also “received the probability of attachment based on AIR Worldwide Corp.’s (AIR) model CLASIC/2 V12.5 (warm sea surface temperature catalog) for each of the bonds listed below. Today’s rating actions were based on the results of these models.”
S&P also said: “Regarding the Montana Re 2010-1 Class C notes, if there are no covered events between now and the next reset, we would expect to raise the rating on the notes to ‘B(sf)’ since the transaction requires each reset to use the latest commercially available version of RMS’ model. The Longpoint Re notes have a similar requirement to use the latest commercially available RMS model.
“We had placed our ratings on the 16 bonds on CreditWatch negative to reflect the impact that the update to RMS’ model had on the modeled probability of attachment. Although modeling companies periodically update their models, the impact on the probability of attachment from such update is typically minimal. However, in this instance, the probability of attachment increased significantly.
“We intend to resolve the CreditWatch status of the remaining six bonds within the next two weeks.”
The rating agency listed the cat bonds affected by its actions as follows:
Ibis Re Ltd.
Series 2009-1 Class A notes BB(sf) BB(sf)/Watch Neg
Series 2009-1 Class B notes B+(sf) BB-(sf)/Watch Neg
Series 2010-1 Class A notes BB-(sf) BB(sf)/Watch Neg
Series 2010-1 Class B notes B(sf) B+(sf)/Watch Neg
Montana Re Ltd.
Series 2009-1 Class A notes B(sf) BB-(sf)/Watch Neg
Series 2009-1 Class B notes CCC+(sf) B-(sf)/Watch Neg
Series 2010-1 Class C notes CCC+(sf) B(sf)/Watch Neg
Longpoint Re II Ltd.
Series 2009-1 Class A notes BB+(sf) BB+(sf)/Watch Neg
Series 2009-1 Class B notes BB+(sf) BB+(sf)/Watch Neg
Calabash Re III Ltd.
Series 2009-1 Class B notes BB+(sf) BB+/Watch Neg
Source: Standard & Poor’s
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