Credit ratings for cat bonds: are they worth the cost and effort?


Pete Vloedman

The recent downgrades of numerous cat bonds triggered by changes to the risk models underpinning them may be a contributory factor in a sharp reduction in the number of non-specialised investors contributing to this sector.

Pete Vloedman of Anchor Risk Advisors analyses this dynamic.

Recent newswire headlines have brought the rationale for obtaining credit ratings on catastrophe (cat) bonds back into the structuring discussion. According to Swiss Re, approximately 94 percent of cat bonds in circulation have a credit rating. But what purpose do they serve? Are they worth the cost? Are credit ratings necessary to achieve full distribution of a cat bond? This article discusses the historical and current rationale for cat bond credit ratings.

Why do cat bonds have credit ratings?

Catastrophe bonds, Cat bonds, Rating agencies, Alternative risk transfer

Intelligent Insurer