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Press Release - MARCH 17, 2017

A.M. Best Releases Criteria: Rating Monoline Financial Guarantors in the Public Finance Sector


CONTACTS:
 Emmanuel Modu
Managing Director,
Insurance-Linked Securities
+1 908 439 2200, ext. 5356
emmanuel.modu@ambest.com

Maura McGuigan
Associate Director
Credit Rating Criteria, Research & Analytics
+1 908 439 2200, ext. 5317
maura.mcguigan@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - MARCH 17, 2017
A.M. Best today announced the publication of a new criteria procedure, “Rating Monoline Financial Guarantors in the Public Finance Sector.” This publication follows the public comment period that began Jan. 17, 2017, and closed Feb. 17, 2017. This final document contains just minor changes relative to the version released for comment. Additionally, there were no changes to Credit Ratings as a result of the material changes made in this criteria procedure.

The changes to this criteria procedure include a significant modification to the applicable default rates used in simulating the losses in a financial guarantor’s portfolio of insured municipal bonds in order to more closely reflect observed municipal bond default rates. Specifically, the Risk Class Relativity Factors have been adjusted such that, depending on the risk classification, the applicable municipal bond default rates range from 25% to 100% of the default rates in “Best’s Idealized Issue Default Matrix.” The changes also include revising the default period assumption to two years for all risk classifications rather than assuming a two- to four-year default period that varied based on the risk classification. Lastly, there is a loss given default (LGD) stress assumption to account for greater volatility in recoveries; the range of LGD stress for each respective risk class spans from 150% to 300% of base LGD.

This criteria procedure is available at www.ambest.com/ratings/methodology .

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