Residential Reinsurance 2019 Ltd. Series 2019-I Class 13 Notes Assigned 'B-(sf)' Preliminary Rating

NEW YORK (S&P Global Ratings) April 23, 2019--S&P Global Ratings said today it has assigned a preliminary rating of 'B-(sf)' to the Series 2019-I Class 13 notes to be issued by Residential Reinsurance 2019 Ltd. (Res Re 2019). The notes cover losses in all 50 states and the District of Columbia from tropical cyclone, earthquake (including fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, and other perils (including, in each case, flood losses from automobile policies and renters' policies) on an annual aggregate basis.
The ratings are based on the lowest of the natural-catastrophe (nat-cat) risk factor ('b-'), the rating on the assets in the Regulation 114 trust account ('AAAm'), and the rating on the ceding insurer, various operating companies in the USAA corporation (all currently rated 'AA+/Stable/--').
The base-case one-year probability of attachment, expected loss, and probability of exhaustion are 2.06%, 0.98%, and 0.44% respectively. Using the warm sea surface temperature results, these percentages are 2.45%, 1.16%, and 0.52%. Additionally, this issuance has a variable reset. Beginning with the initial reset in June 2020, the attachment probability and expected loss can be reset to maximums of 2.56% and 1.23%, respectively. This maximum attachment probability, using the WSST results, was used as the baseline to determine the nat-cat risk factor for the remaining risk periods.
Based on AIR's analysis, on a historical basis, there have not been any years when the modeled losses exceeded the initial attachment level of the notes.
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