The First Catastrophe Bond Rating Action Due to the Covid-19 Coronavirus Pandemic

I did not realize there were any of these things around. Truth be told I was looking to see if there was any early Atlantic hurricane season action.
From Artemis, April 3:

Swiss Re’s Vita Capital VI mortality bond on negative watch on Covid-19: S&P

The first catastrophe bond rating action due to the Covid-19 coronavirus pandemic is unsurprisingly related to one of the few mortality cat bonds left in the market, Swiss Re’s late 2015 Vita Capital VI Limited (Series 2015-1) transaction, which has been put on a negative watch by S&P Global Ratings.

The Vita Capital VI excess or extreme mortality cat bond deal provides its sponsor, global reinsurance player Swiss Re, with a fully collateralised and capital markets backed source of multi-year extreme mortality retrocession.

As a result, the Vita Capital VI mortality bonds are exposed to potential losses should deaths due to the coronavirus pandemic rise so significantly that they elevate the rate of mortality claims experienced by Swiss Re’s life reinsurance business.

The transaction saw a single $100 million tranche of notes issued that are exposed to extreme mortality events in Australia, the UK and Canada across a 5 year term that began in January 2016.
The mortality cat bond notes can be triggered by any extreme mortality event that raises an age and gender weighted reference mortality index above predefined trigger points.

The $100 million of Vita Capital VI notes launched to investors with an expected loss of 0.99% and paying them a 2.9% coupon and were rated ‘BB (sf)’ by S&P at the time of issuance.
Now, given the threat posed by the Covid-19 coronavirus pandemic, S&P has placed its ‘BB (sf)’ rating on the Class A notes issued by Vita Capital VI Ltd. on CreditWatch with negative implications.
“The notes could be at risk of triggering if the COVID-19 pandemic leads to a significant increase in deaths in either the U.K., Canada, or Australia,” S&P explained.

Adding, “The risk period ends on Dec. 31, 2020. We currently believe that there is such significant uncertainty around the total number of deaths caused by the pandemic in any of the three countries that it is difficult to determine the likelihood of a rating action at this stage.”

Interestingly, S&P specifically call out the UK government for its change in strategy in how it dealt with the coronavirus outbreak, referencing the initial push for a ‘herd immunity’ approach by the current leadership there....

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The bean body counters will have to tell us if there is any excess mortality in Her Majesty's big (landmass) Commonwealth countries, to date it doesn't appear that there is.
In the UK the count is probably inching closer to the triggers.