Bloomberg News
Moody’s Ratings upgraded Florida hurricane- and insurance-related bonds to Aa2, affecting more than $5 billion outstanding.
The agency upgraded revenue bonds from the Florida Hurricane Catastrophe Fund one notch, Citizens Property Insurance Corp. two notches and Florida Insurance Guaranty Association three notches. The outlook is stable.
“The Aa2 ratings reflect our view of the strong parental linkage between the state of Florida (Aaa stable) and these three state-sponsored insurance entities,” Moody’s said in its report released late Friday. The state provides governance oversight: all three entities are essential to the state and they gain revenues from state-wide assessments, the rating agency noted.
FIGA is the only one of the three currently levying assessments and these are well below legal limits, Moody’s said. The Cat fund and Citizens have ample legal capacity to levy assessments.
“The ratings are notched down twice from the state’s rating due to the unpredictability of weather events that could drive up claims liabilities above on-hand resources, and the practical capacity for the entities to increase leverage and assessments to cover those claims,” Moody’s said.
S&P Global Ratings
The
Ben Watkins, director of the Florida Division of Bond Finance, which oversees the entities’ bond sales, didn’t immediately respond to a request for a comment.
Earlier this month, Watkins said he was unsure if this season’s two major hurricanes and the resulting damage claims would lead to additional pre-event Cat bond sales this spring.
The Catastrophe Fund serves as a backup insurer or “reinsurer” for Florida’s property insurance companies when claims from hurricanes go above certain levels.
Citizens provides windstorm coverage and general property insurance for homeowners who cannot get insurance elsewhere.
The Florida Insurance Assistance Interlocal Agency issues debt for the Florida Insurance Guaranty Association, which pays covered claims to policyholders of or claimants against insolvent insurers.