Press Release|Public Finance
KBRA Affirms AA- Rating on Louisiana Local Government Environmental Facilities and Community Development Authority Insurance Assessment Revenue Bonds and Notes (Louisiana Insurance Guaranty Association Project); Outlook is Stable
18 Apr 2024 | New York
KBRA affirms the AA- long-term rating with a Stable Outlook on the Louisiana Local Government Environmental Facilities and Community Development Authority Insurance Assessment Revenue Notes (Louisiana Insurance Guaranty Association Project), Series 2022A, and Insurance Assessment Revenue Bonds, Series 2022B.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- The essential nature of the Association’s purpose, which enables the continued availability of property and casualty insurance in Louisiana.
- Generally favorable assessment base growth realized over the past two decades, coupled with the recently- granted authorization to assess member insurers at an annual rate of 2% of net direct written premiums, which is currently estimated to produce between $230 million and $240 million annually if utilized.
- Sound projected debt service coverage levels, coupled with limited known capital pressures.
- LIGA’s ability to assess various policy lines, including auto insurance, is a credit positive.
Credit Challenges
- Susceptibility to continued hurricane and tropical storm damage, attributable to Louisiana’s Gulf Coast domicile and comparatively low mean surface elevation.
- The recent uptick in insurer insolvencies subject to assessment, necessitating the 2022 issuance of debt.
- Weak socioeconomic metrics and demographic trends.
Rating Sensitivities
For Upgrade
- Improved debt service coverage levels attributable to sustained organic growth in the assessment base.
For Downgrade
- A material decline in the assessable base that pressures the Association’s ability to maintain debt service coverage levels commensurate with the rate covenant.
- An elevated level of insurer insolvencies necessitating the issuance of additional debt, thereby pressuring debt service coverage.
- A material alteration or removal of the State’s statutorily set per-claim liability cap that exposes LIGA to large claims stemming from future insolvencies.
To access rating and relevant documents, click here.