Further loses may be added, causing the bond to pay out
A catastrophe bond by Avalon Re which is close to being triggered has been extended for a further three months to allow for loss development and reporting, Reuters reports.
Standard & Poor’s said the maturity date of the Class B and Class C notes had been extended to 9 September 2009, from June 9, 2009. The bonds were previously extended in March and may be extended eight times for three months each time
Ratings on the notes remain unchanged at CCC and CC, S&P said.
Cayman Islands-based Avalon Re sold the bonds in 2005. They were due to mature on June 6, 2008, but were extended after a July 2007 steam pipe explosion in New York pushed estimated losses to ceding Bermuda-based insurer Oil Casualty Insurance (OCIL) close to the level that would trigger the bond.
S&P downgraded the Class C notes in April 2008 on that news.
Certain claims are still being monitored to determine whether they will become covered claims.
Avalon Re faces losses of $147m from Hurricane Katrina, plus a further $150m from the December 2005 explosion at Buncefield oil depot and up to $65m from the steam pipe explosion.
Total losses of more than $300 million would trigger a payout.