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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

11 Apr 2025   |   New York

Contacts

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

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 approximately $250 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 uptick in insurer insolvencies in 2021-2022 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 ratings and relevant documents, click here.

Click here to view the report.

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1009027

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