Moody's rates Kepler loan Ba2

Moody's Investors Service said it assigned a definitive Ba2 rating Kepler Holdings Ltd.'s $200 million senior secured term loan facility due June 2009 following review of final executed documents.

The outlook for the rating is stable.

The privately-placed senior secured term loan facility, which is being syndicated to financial institutions and other institutional lenders, is sponsored by Hannover Ruckversicherung AG and its affiliates, E+S Ruckversicherung AG and Hannover Re (Bermuda) Ltd. for natural catastrophe risks. Investors will provide aggregate catastrophe excess of loss reinsurance protection - on an indemnity basis - to Hannover Re for the portion of losses in excess of a stipulated attachment point up to a stipulated exhaustion point.

The rating for the term loan reflects the agency's analysis of the risk of overstated reserves at the time of commutation, the uncertainty underlying the annual exceedance curve, Hannover's ability to pay quarterly reinsurance premiums (e.g., interest payments) and to make the collateral trust whole for any investment losses and the investment performance of the collateral assets.

The rating also reflects qualitative considerations such as Hannover's option to buy reinsurance on its retained share, perhaps reducing its "skin in the game", the risk that reinsurers, including Hannover Re, may relax contract terms and conditions as the market becomes more competitive, and the fact that segregated cell technology has never been tested in bankruptcy, Moody's said.

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