Ratings Recap: Swiss Re (Cat Bond), Transmonde, Sagicor, Bahamas First

March 10, 2010

Standard & Poor’s Ratings Services has assigned its preliminary ‘B-‘ credit rating to the class II-CN3 notes series 2010-1 issued under the principal at-risk variable-rate note program, Successor X Ltd. Swiss Re (A+/Stable/A-1) sponsors the program, which “aims to transfer to the note holders major North Atlantic hurricane risk and major European windstorm risk between March 2010 and March 2013,” S&P explained.”This transaction is the first catastrophe bond that we have rated using PERILS AG’s industry benchmark for European windstorm catastrophes. Various shareholders established PERILS in January 2009 to collect anonymous aggregated information on insurance industry related catastrophe loss estimates for the European continent following catastrophic events.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based Transmonde Services Insurance Company Limited, both with stable outlooks. The ratings of Transmonde reflect its “minimal underwriting leverage, strong level of capitalization and profitable operating results driven by its excellent underwriting performance,” said best. As partial offsetting factors, Best cited the “company’s relatively high retentions and concentration in liability lines with significant loss severity potential and its limited market profile as a single parent captive. Transmonde provides professional, general and pollution liability coverages to subsidiaries and affiliates of its publicly traded Swiss parent, SGS Group.” In addition Best noted that Transmonde has “maintained very conservative underwriting leverage ratios as surplus has consistently grown to support increasing business volumes. This surplus growth is due to the retained earnings from highly profitable operating results, which are driven by the company’s excellent underwriting performance. Transmonde has posted low loss and loss adjustment expense ratios, reflecting SGS Group’s effective risk management. Transmonde’s relatively high per occurrence retentions are mitigated by significant deductibles, conservative reserving practices and minimal exposure to pollution losses. SGS Group has no manufacturing or trading interests to contribute to pollution exposure. In 2004, Transmonde entered into loan facility agreements to provide substantial funds to its parent in the form of loans. Concerns regarding liquidity at Transmonde are mitigated in part by a favorable termination provision. Transmonde also benefits from the strong balance sheet and financial flexibility of SGS Group.”

A.M. Best Co. has placed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Cayman Islands-based Sagicor General Insurance under review with negative implications. Best explained that the rating actions follow the announcement that Sagicor Cayman’s parent, Sagicor Life Jamaica Limited, “has entered into a share purchase agreement with Bahamas First Holdings Limited (BFH) for the sale of Sagicor Cayman [See following article]. Best said the ratings would remain under review “pending the closing of the transaction and its discussion with BFH management regarding its strategic plans for Sagicor Cayman and its future role within the BFH group.”

A.M. Best Co. has placed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bahamas First General Insurance Company Limited (BFG) under review with negative implications. BFG is the primary holding of its parent company, Bahamas First Holdings Limited (BFH). Both companies are domiciled in Nassau, Bahamas. The rating actions “follow BFH’s acquisition of Sagicor General Insurance (Cayman) Ltd. from Sagicor Life Jamaica Limited [See above article]. Best said the ratings of BFS will remain under review with negative implications “pending approval by regulators and completion of Best’s analysis of the transaction and the effects on both BFS and BFH’s ongoing operations and capitalization.”

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