Mariah II bond starts paying out
Investors in the $100mn tornado bond Mariah II are set to incur losses as totals for events covered by the bond pass its $725mn trigger, according to an update from ratings agency Standard & Poor's (S&P).
The payout will help the bond's sponsor, the US mutual insurer American Family, recoup its losses in one of the worst years for tornado damage on record.
S&P said it had received loss updates from reporting agency Property Claim Services (PCS), which raised its loss figure for the sequence of tornadoes that struck 10 states from Georgia to Wisconsin between 3 and 5 April.
PCS increased its estimate of losses for Catastrophe Series 42 from $96.02mn to $125.5mn.
This took total losses through the end of July for the current annual risk period to $726.9mn.
S&P said this was still in line with its rating of CCC+ on the higher-lying Mariah I tranche of notes, which start paying out when losses reach $825mn in any annual risk period. The notes have a CreditWatch developing outlook.
The rating was revised down from B in late June after an exceptionally active start to the tornado season quickly racked up covered losses for the bond.
The Mariah II notes are unrated.
S&P said it is awaiting results for the next event in the PCS series as well as updates on previously reported events.
"We anticipate receiving these updates at the end of September and will update the CreditWatch status of the rating shortly thereafter," the agency confirmed.
As Trading Risk has previously reported, the Mariah bonds have been marked down in trading on the secondary market as losses have mounted. By the end of August, the Mariah II notes were priced at about the 50 cents per dollar range while the Mariah I issuance was priced in the 70-80 cent range.