S&P Notes: ‘Nat Cat Bonds’ Closely Linked To Cedants’ Practices

“All natural catastrophe (nat-cat) bonds share some common features, but indemnified nat-cat bonds are much more closely related to the practices of the ceding company than non-indemnified structures,” said Standard & Poor’s Ratings Services in a report published today – “Approach To Rating Indemnified Natural Catastrophe Insurance-Linked Securities.”

Credit analyst Cameron Heath explained: “The risks borne by noteholders are directly affected by how the cedant underwrites its book of business, its loss estimation and claims settlement processes, and the completeness and quality of the policy data used to populate the model and generate the modeled results.

“This affects the scope, type, and amount of information Standard & Poor’s requests when presented with the opportunity to rate an indemnified bond,” he added.

The report is available to subscribers of RatingsDirect, the real-time Web-based source for S&P’s credit ratings, research, and risk analysis, at: www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to: research_request@standardandpoors.com. Ratings information can also be found on S&P’s public Web site at: www.standardandpoors.com.

Source: Standard & Poor’s