Fitch Downgrades Florida Hurricane Catastrophe Fund to 'AA-'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded the Florida Hurricane Catastrophe Fund (FHCF FHCF Florida Hurricane Catastrophe Fund FHCF Flying Horse Cracking Force (hacking) ) and the Florida Hurricane Catastrophe Fund Finance Corp. (FHCF Finance Corp.) to 'AA-' from 'AA'. The downgrade affects the FHCF Finance Corp's $1.35 billion series 2006A bonds, which are downgraded to 'AA-' from 'AA', and $2.8 billion series 2006B extendible floating-rate notes, which are downgraded to 'AA-/F1+' from 'AA/F1+'. The Rating Outlook is Stable. Insurance reform legislation that the State of Florida signed into law last week increases primary insurers' access to the FHCF's below market rate reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. coverage by up to $12 billion per season, with the state able to increase the limits up to an additional $4 billion per season. This raises the FHCF's single season exposure to as high as $32 billion from its previous cap of $16 billion. The effect of this change increases the potential size of a future borrowing needed to pay claims after a catastrophic hurricane. It also increases the likelihood the FHCF will eventually reach its bonding capacity, which would put additional pressure on the state to increase the FHCF's bonding capacity or craft another solution to maintain the availability of affordable hurricane insurance within the state. Another component of the legislation repeals the 25% rapid cash buildup build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. factor for FHCF premiums, which reduces the ability of the FHCF to replenish its claims paying resources after a season in which it incurs significant losses. Finally, the legislation allows insurers to choose a lower retention level for FHCF reinsurance coverage, although this is priced at such a high level that it is not likely to be significantly utilized. Bonds are secured primarily by emergency assessments paid by policyholders on most lines of property and casualty insurance sold in the state, reimbursement premiums paid by residential property insurers, and investment income on series 2006B bond proceeds. Fitch continues to gain comfort from the breadth and stability of the revenue streams that comprise the pledged security and the strong debt service coverage the pledged revenues provide. The additional bonds test Additional bonds test A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds. additional bonds test remains at 1.25 times (x) maximum annual debt service, and emergency assessments continue to be capped at 6% of the direct written premium base per season and 10% of the premium base in aggregate. The series 2006A bonds are additionally secured by a parity common reserve, and the 2006B notes are also secured by unspent note proceeds. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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