Although the effects of Hurricane Harvey on the long-term credit quality of state and local entities are currently unknown, bond insurers' exposure to Hurricane Harvey is easily manageable. Based on bond insurers' experience with Hurricane Katrina in 2005, the industry is likely to pay liquidity claims as opposed to loss claims. Bond insurers have insured a total of $13.6 billion in bonds of public finance entities in Federal Emergency Management Agency (FEMA)-designated counties.
In the immediate aftermath of the storm, as with Hurricane Katrina, insurers may be called on to make scheduled debt-service payments--not because of issuers' inability to pay, but because of electronic transfer problems. In the absence of electricity, phone service, and other basic business infrastructure, funds may not be transferred to investors in a timely manner. Issuers will likely reimburse bond insurers for these payments. For insured debt-service payments due Sept. 1, 2017, most issuers have already deposited funds with the paying agents.
S&P Global Ratings has measured the next two months of debt-service payments for all issuers in FEMA-designated counties against an insurer's liquidity resources. Each insurer has sufficient liquidity resources to meet these potential near-term claim payments.
|(Mil. $)||Gross par, declared FEMA counties||Two months' debt-service payments, declared FEMA counties||Gross par affected per county, not declared FEMA counties|
|Assured Guaranty Ltd.||7,827||239||199|
|Build America Mutual Assurance Co.||3,576||117||905|
|National Public Finance Guarantee Corp.||2,213||46||549|