Trinom Ltd. Catastrophe-Linked Notes Rated

Fitch has assigned a “BB-” rating to the $60 million of class A-1 catastrophe-linked notes and a “BB” rating to the $97 million of class A-2 catastrophe-linked notes issued by Trinom Ltd. The notes mature June 18, 2004. The securities were issued to support a financial contract between the issuer and Zurich Insurance Co.

The financial contract covers the risk of certain U.S. (Gulf and East Coast) hurricanes, U.S. (California) earthquakes and European windstorms. The securities are structured such that the A-2 notes are exposed to loss only after a trigger event occurs while the A-1 notes are exposed to loss, at a higher level, from the date of closing. Thus, the A-2 notes provide frequency protection (i.e., protection against more than one event at a lower loss level) while the A-1 notes provide severity protection (i.e. protection from a single event at a high loss level). The risk structure of the contract is a modeled index trigger based on the physical parameters of the covered perils.

Fitch’s ratings of the notes address the likelihood that investors will receive timely payment of interest and the ultimate payment of principal on the final maturity date. Morgan Stanley Dean Witter and Aon Capital Markets structured and underwrote the securities. Applied Insurance Research (AIR) provided the catastrophic models and risk analysis to support the transaction.

The ratings reflect Fitch’s catastrophe-linked bond rating methodology that incorporates a review of: AIR’s methodology and the models used to analyze the covered risks, the loss distributions resulting from AIR’s analysis, and the securities’ legal and structural soundness.

Topics Catastrophe