Fitch Affirms Lion I Re Limited Catastrophe Notes at 'B+sf'; Outlook Stable

NEW YORK--()--Fitch Ratings affirms the 'B+sf' rating to the Principal At-Risk Variable Rate Notes issued by Lion I Re Limited, a special purpose reinsurance vehicle in Ireland as follows:

--EUR190,000,000 Principal At-Risk Variable Rate Notes; scheduled maturity April 28, 2017.

The Rating Outlook is Stable.

This affirmation is based on Fitch's annual surveillance review of the notes that includes a scheduled evaluation of the natural catastrophe risk, counterparty exposure, collateral assets and structural performance.

KEY RATING DRIVERS

The notes are exposed to European windstorm losses as reported by the ceding insurer, Assicurazioni Generali S.p.A. (Generali). There were no reported Covered Events that exceeded the Trigger Amount of EUR400 million in the second Risk Period of the transaction from Jan. 1, 2015 through Dec. 31, 2015.

On Dec. 15, 2015, Risk Management Solutions, Inc. (RMS), acting as the Reset Agent, completed the Reset Report that indicated an attachment probability as 2.25% for the third Risk Period (Jan. 1, 2016 through April 14, 2017). This corresponds to an implied rating of 'B+' per the calibration table listed in Fitch's 'Insurance-Linked Securities Methodology'. The updated attachment probability includes updated property exposures within the Subject Business in the Covered Area that have been run through an escrowed RMS model. This is a slight decrease from the prior attachment probability of 2.32%.

The Trigger Amount and Exhaustion Amount remain unchanged at EUR400 million and EUR800 million, respectively.

Per a specified formula in the Indenture (the Risk Spread Calculation), the Updated Risk Interest Spread was reset to 2.31% which is a small reduction from the prior period of 2.36%. This reflects a decrease in the Updated Modeled Expected Loss to 1.05% from 1.09% but is higher than the Initial Modeled Expected Loss of 1.00%.

Fitch upgraded Generali's Issuer Default Rating (IDR) to 'A-' with a Stable Outlook on Sept. 15, 2015. Previously, Generali had an IDR of 'BBB+', Stable Outlook. This upgrade did not affect the rating of the Lion I Re Note as Fitch rates to the weakest link which is currently the implied rating of the catastrophe event.

The Fitch IDR of the collateral assets, notes issued by the European Bank for Reconstruction and Development (EBRD), remain at 'AAA', Stable Outlook.

Fitch believes the notes and indirect counterparties are performing as required. There have been no reported early redemption notices or events of default and all agents remain in place.

Additional information regarding the notes can be found in prior rating action commentaries on April 25, 2014 and April 22, 2015.

RATING SENSITIVITIES

This rating is sensitive to the occurrence of a covered event, Generali's election to reset the notes' attachment levels, changes in the data quality, the counterparty rating of Generali and the rating on the assets held in the collateral account.

If qualifying covered event occurs that causes a per occurrence loss to exceed the attachment level, Fitch will downgrade the notes reflecting an effective loss of principal and issue a Recovery Rating.

To a lesser extent, the notes may be downgraded if the EBRD notes or Generali are sufficiently downgraded to a level commensurate with the implied rating of the natural catastrophe risk.

The catastrophe risk element is highly model-driven and actual losses may differ from the results of the simulation analysis. The escrow models may not reflect future methodology enhancements by RMS which may have an adverse or beneficial effect on the implied rating of the notes were such future methodology considered.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Insurance-Linked Securities Methodology (pub. 23 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868333

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003048

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003048

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Phillip Chan
Director
+1-212-908-0745
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Christopher Grimes
Director
+1-312-368-3263
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Phillip Chan
Director
+1-212-908-0745
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Christopher Grimes
Director
+1-312-368-3263
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com