An important bondholder protection for a rated RMBS or ABS is the geographic diversification of the underlying borrowers. This diversification provides protection against significant one-off loss and is evident with severe weather events including floods and fire.
Since the listing of GCI almost seven years ago, there has been numerous severe weather events across Australia and the impact of each of these events has been immaterial to the GCI portfolio. Geographic diversification provides a first layer of protection, with any individual exposure mitigated by home insurance. When this is overlayed with bond holder protections including borrowers’ equity, LMI, Excess Spread and Credit Enhancement, the impact on the overall GCI portfolio has been de minimis.
