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Business OverviewRisk ManagementMunicipal Underwriting
Municipal Underwriting
FSA insures bonds of investment-grade municipal obligors secured generally by either a pledge of a tax source or taxing power or a dedicated, investment-grade revenue stream from an essential public service. FSA also insures bonds of municipal conduits issued on behalf of not-for-profit health care and educational borrowers.
We consider:
- the nature and priority of the obligation and security provided (e.g., a pledge of specific revenues or a pledge of taxes)
- the essential nature and exclusivity of the franchise or service
- the financial condition and liquidity of the issuer
- economic and demographic conditions and trends that will affect the issuer's ability to pay its debt.
We usually require amortizing debt service schedules.
To maintain appropriate safeguards and assure compliance with underwriting standards and guidelines, U.S. municipal finance transactions are reviewed and approved by an underwriting officer in the municipal risk management department and additional members of the Municipal Underwriting Committee (MUNC), which may include the chairman/CEO, the president, an attorney in the Legal department's municipal group and senior members of the Public Finance department. The number and level of required member approvals is based on the size and complexity of each transaction together with the exposure to be retained.
Health Care Criteria
FSA will provide insurance for a health care provider that dominates its region and has the capability to sustain its franchise and market position for the life of the bonds. Security provisions vary based on credit standing but will at times include mortgages or springing mortgages, covenants designed to limit leverage and maintain liquidity at acceptable levels, and consultant call-in requirements for early intervention and loss mitigation.