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Member, Beacon International Group, Ltd.
NEW YORK—Standard & Poor's Corp. on Wednesday downgraded a catastrophe bond backing Bermuda-based Platinum Underwriters Holdings Ltd., saying investors in Topiary Capital Ltd. are at risk of losses from subsequent catastrophes.
In a statement, S&P said the downgrade of Topiary Capital's Series 2008-1 notes to CCC+(sf) from the previous BB+(sf) reflects losses due to the earthquake and tsunami in Japan.
Platinum Underwriters Holdings Ltd. said in recent weeks that it expected the Topiary Capital issue, which provides Platinum up to $200 million in second- and subsequent-event coverage for certain U.S. hurricanes, U.S. earthquakes, European windstorms and Japan earthquakes, to be triggered by the March 11 events in Japan.
Catastrophe modeler Risk Management Solutions Inc. also concluded that the earthquake was an activation event for notes that back Platinum Underwriters.
S&P said noteholders will be at risk of losses of principal and interest for any subsequent covered events that occur from March 11 through July 31.
Two still on CreditWatch
The notes were one of three bonds that S&P had warned in March it might downgrade as a result of the disaster in Japan. While Topiary Capital no longer is on S&P's CreditWatch due to Wednesday's action, Montana Re Ltd. Class E notes and Vita Capital IV Ltd. Series III mortality notes remain so, S&P said.
In other recent ratings actions, S&P last week placed its ratings of 16 natural peril catastrophe bonds issued by insurers under review for a possible downgrade due to RMS' updated hurricane model. The RiskLink V11 U.S. Hurricane Model doubled the modeler's one-in-100-year estimate of insured hurricane losses in Texas, increased its loss estimate at least 75% in the Middle Atlantic region and had smaller increases in Florida.
LONDON (Reuters)—The Japanese earthquake is set to be the first natural disaster that triggers a number of catastrophe bonds, surpassing 2005's Hurricane Katrina to become the event with the biggest impact on the alternative reinsurance sector.