Texas Windstorm Insurer to Offer $500M of Unrated Debt: Muni Deals

By | September 15, 2014

Texas Windstorm Insurance Association this week is offering $500 million in unrated municipal debt as the Austin-based group girds for the hurricane season through November.

The association, created by the Texas legislature in 1971 to be the windstorm and hail insurer of last resort, is selling the taxable securities to help pay claims for any catastrophic event this year, bond documents show. Revenue from premiums backs the debt issued through the Texas Public Finance Authority.

“Based on discussions with the Texas Public Finance Authority, their financial advisers, and the underwriters on the transaction, the decision was made not to go through the process of obtaining a rating on this issuance,” said Jessica Crass, a compliance specialist at the association, in an e-mail.

The debt offering is the insurance group’s first since 2012, when it sold $500 million of revenue notes, a financial filing shows.

Risks to the potential buyers include that the lack of a rating “could adversely affect the marketability and market price” of the securities, according to bond documents.

In addition, storms and “acts of God” could affect the association’s ability to meet its obligations, the documents said.

As of December, the association had about $85 billion in insurance exposure in the Gulf Coast region of Texas, the financial filing shows. Last year, the organization posted operating income of $199 million, compared with a $172 million loss in 2012, according to the filing.

Municipal issuers have sold $6.5 billion of unrated, long- term fixed-rate debt this year through July 31, data compiled by Bloomberg show. Last year’s tally of $14.6 billion was 46 percent higher than in 2008, according to the figures.

Hurricane season runs from June 1 through Nov. 30, according to the National Oceanic & Atmospheric Administration.

With assistance from Sowjana Sivaloganathan in Princeton and Darrell Preston in Dallas.

Topics Catastrophe Carriers Natural Disasters Texas Windstorm

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