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Fitch Affirms Long Point Re III Series 2015-1 Limited Catastrophe Notes at 'BB-sf'; Outlook Stable
[May 06, 2016]

Fitch Affirms Long Point Re III Series 2015-1 Limited Catastrophe Notes at 'BB-sf'; Outlook Stable


Fitch Ratings has affirmed the 'BB-sf' rating on the following Principal At-Risk Variable Rate Notes issued by Long Point Re III Limited, a Cayman Islands exempted company licensed as a Class C insurer:

---$300,000,000 Class A Notes; scheduled maturity May 23, 2018.

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 Series 2015-1 notes provide three years of indemnity, per occurrence coverage to various insurance subsidiaries or affiliates of the Travelers Companies, Inc. (Travelers) (IDR 'A+'/Stable Outlook) for Tropical Cyclone, Earthquake, Severe Thunderstorms and Winter Storm events. The Covered Area is restricted to the northeast U.S. and includes: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Vermont.

There have been no reported Covered Events that exceeded the Trigger Amount of $2.0 billion in the first Risk Period of the transaction which runs from May 15, 2015 through May 15, 2016.

On May 2, 2016, AIR Worldwide (AIR), acting as the Reset Agent, completed the Reset Report that indicated an attachment probability of 1.278% for the Risk Period beginning May 16, 2016 through May 15, 2017. This corresponds to an implied rating of 'BB-' 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 AIR model. This is a very minor increase from the prior attachment probability of 1.276%.

The Updated Trigger Amount and Exhaustion Amount were lowered modestly to $1.968 billion and $2.468 billion, respectively from the initial levels of $2.0 billion and $2.5 billion.

Per a specified formula in the Indenture (the Risk Spread Calculation), the Updated Risk Interest Spread was reset at 3.748%, essentially unchanged from the Initial Risk Interest Spread of 3.75%, reflecting the very small decrease in the Updated Modeled Expected Loss to 1.105% (from the initial 1.106%).

The collateral asset meets Fitch's criteria requirement for 'AAA'-rated U.S. money market funds.

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 please see Fitch's prior rating action commentary dated May 15, 2015 at www.fitchratings.com.

RATING SENSITIVITIES

This rating is sensitive to the occurrence of a qualifying natural catastrophe event(s), the Travelers' election to reset the note's expected loss, changes in the data quality, the counterparty rating of the Travelers and the rating or performance on the assets held in the collateral account.

If a qualifying covered eent occurs that results in a loss of principal, Fitch will downgrade the note to reflect an effective default and issue a Recovery Rating.



The implied rating of the natural catastrophe risk profile may change if the Travelers elects to significantly reduce (or increase) the Modeled Expected Loss at the Reset Dates which may impact the rating of the Series 2015-1 Class A Notes.

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


To a lesser extent, the notes may be downgraded if the credit ratings of the Travelers or the reinsurance trust account assets were significantly downgraded to a level commensurate to the implied rating of the natural catastrophe risk. Likewise, it is unlikely that the 2015-1 notes would be rated above the credit ratings of the Travelers if the implied rating of the natural catastrophe risk was significantly reduced to those ratings.

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=1004106

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004106

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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