Last week, Standard & Poor’s (“S&P”) revealed that a $190 million catastrophe bond issued by special purpose vehicle KAMP RE 2005 Ltd. (“KAMP RE”) on behalf of Swiss Reinsurance America Corp., (“Swiss Re”) is about to be triggered.

The bond was created by Swiss Re in August 2005 to help cover its reinsurance exposure to Zurich Financial Services’ wind and earthquake risks. The bond was triggered when Zurich’s losses on those risks exceeded $1 billion. S&P reported that it recently received a proof-of-claim notice from KAMP RE's administrator estimating net losses over the $1 billion trigger. Most of the claimed losses are reported to be Katrina-related claims. According to S&P, this is the first cat bond rated by the organization that will result in a loss of investors’ principal.

The claims reviewer, KPMG Cayman Islands, now has 20 days from the receipt of the notice to evaluate the claim. If it is determined that paid losses do exceed the trigger amount, KAMP RE will be obligated to make payment to Swiss Re by December 14.

As a result of this news, S&P plans to downgrade the bond to a D rating, from its current rating of CC.