Duration: 2:01
Transcript: We primarily try to stick with double a rated paper or higher. The reason being is that we feel comfortable with overall credit qualities, double a rated or higher due to the low default rate on those securities.
So, we’ve been asked a lot about credit quality.
What really is the difference between various insurers such as MBIA versus, say, BAM or Fidgic and, say, AGM, Assured Guarantee, or what’s triple a rated and why am I not seeing a lot of triple a rated paper versus, say, single a rated paper?
We primarily try to stick with AA rated paper or higher. The reason being is that we feel comfortable with overall credit qualities, AA rated or higher due to the low default rate on those securities.
We make it a habit of making sure that if we’re buying insured paper, such as AGM or AGC or BAM, that we understand what’s called the claims paying ability of that insurance company.
When we’re buying insured paper, and we want to make sure that we understand the, let’s just say, the underlying credit quality, that would be the underlying municipality.
We want to make sure that if the underlying municipality falls in, say, the triple b rated or single a rated range, the insurance, let’s use BAM as an example, it has more of the claims paying ability, that they will be able to service the debt, should there be anything happening with that underlying municipality.
The likelihood of that happening is slim. However, it is comforting to know that you’ve got a good quality insurance company.
