Fitch Affirms Florida Hurricane Catastrophe Fund Finance Corp. at ‘AA’
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The Rating Outlook is Stable.
SECURITY
The bonds are secured by emergency assessments and reimbursement premiums, as well as investment income on unspent, pre-event bond proceeds. Primary security and rating are derived from FHCF's ability to levy emergency assessments on nearly every insurance policy holder in the state for as long as debt is outstanding. Assessments are subject to a 6% cap related to one year's loss and a 10% cap for cumulative years' losses.
KEY RATING DRIVERS
TAX-LIKE ASSESSMENT SECURES BONDS: The bonds are secured by emergency assessments levied on almost all property & casualty insurance policies in the
CURRENT LIQUIDITY STRONG: Financial position is improved following no catastrophe losses over the past six years and regulatory changes that reduced the FHCF's exposure and enhanced its ability to grow its fund balance.
EXPOSURE TO STATUTORY CHANGES: The credit profile of the FHCF is subject to legislative action that may affect the risk or size of its insurance exposure or the ability to grow its claims-paying resources.
STATE HAS SOLID LONG-TERM ECONOMIC PROSPECTS: Long-term economic prospects are solid, although current economic performance remains weak. Economic fundamentals are strong with future growth expected; however, the housing market remains weak and the unemployment rate above average.
CREDIT PROFILE
The FHCF is a tax-exempt trust created by the
Ultimate security for the bonds is derived from FHCF's ability to levy 'emergency assessments' on nearly every insurance policy holder in the state for as long as debt is outstanding to pay debt service on the bonds. The emergency assessments are billed to policy holders through the insurance carriers, on the same bill as their insurance premiums. Non-payment of the emergency assessment is grounds for cancellation of the policy, so collection rates are close to 100%.
The emergency assessment base, derived from the premiums written on property and casualty insurance policies in the state, is large and diverse and provides strong support for bondholders. The assessment is levied as a uniform percentage of up to 6% of that year's aggregate statewide direct written premium (DWP) on subject lines of insurance for losses in a single season, and up to a maximum of 10% for multi-year losses. The lines are very broad and include all property and casualty insurance, excluding only accident and health, workers' compensation and medical malpractice. As the
The FHCF's reimbursement obligation is limited to the lesser of its annually set statutory limit or its claims paying resources. These consist of funds on hand at the beginning of the contract year,
As a reinsurer, FHCF's reimbursement obligation does not commence until an industry retention layer is met by the insurers. For the 2011 season, the retention layer was
The FHCF's credit can be both positively and negatively affected by legislative actions as was seen in 2004 and 2005 when statutory changes significantly increased the FHCF's exposure, changes which were subsequently reversed or allowed to expire. The FHCF cannot file for bankruptcy and cannot be legally dissolved while it has debt outstanding. The state has also covenanted not to take any action that would impair the revenues securing the debt. Other bondholder protections include a 1.25x coverage additional bonds test; post-event bonds also require 1.0x coverage solely from emergency assessments. The FHCF must certify each year that secured revenues cover debt service on parity obligations by at least 1.25x, or else take corrective measures, such as raising the emergency assessment rate, to achieve this coverage.
The general obligation bonds of the state of
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
--'Guidelines for Rating Assessment-Secured Debt Issued by State-Sponsored Property Insurers'
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--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax- Supported Rating Criteria' (
Guidelines for Rating Assessment-Secured Debt Issued by State-Sponsored Property Insurers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=671549
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648897
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Fitch Ratings
Media Relations,
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Primary Analyst:
Senior Director
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Secondary Analyst:
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Committee Chairperson:
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Source: Fitch Ratings
Copyright: | Copyright Business Wire 2012 |
Wordcount: | 1436 |
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