Moody's Investors Service has raised its rating on the Louisiana Citizens Property Insurance Corp.'s $894 million of outstanding tax-exempt assessment revenue bonds to Baa1 from Baa2. The outlook moved to positive from stable.
Moody's said the upgrade is based on the strong legal security provided by the corporation's ability to levy on policyholders the emergency assessments that support the bonds. Other bondholder protection includes two debt-service reserve funds, strong state support for the insurance program, and fairly strong liquidity and claims-paying ability.
CPIC issued bonds in 2006 to pay outstanding claims after suffering losses of approximately $1.1 billion from 80,000 claims as a result of hurricanes Rita and Katrina in 2005. The proceeds restored the agency's ability to reimburse policyholders, which was exhausted by the storms.
Originally, the agency sold $678 million of fixed-rate bonds and $300 million of auction-rate securities, which were converted to fixed rate in 2009.
Moody's put CPIC's debt on review for possible downgrades in 2007 when the corporation said software problems prevented it from retrieving certain financial records to complete audits in fiscal 2005 and 2006.
CPIC was created in 2003 as the insurer of last resort for Louisiana residents unable to obtain property insurance through conventional means.
The agency's 2006 bonds are rated A-minus by Standard & Poor's and BBB by Fitch Ratings.