Jacksonville’s public pension reform helps the city get an improved credit rating

Link: https://reason.org/commentary/jacksonvilles-public-pension-reform-helps-the-city-get-an-improved-credit-rating/

Excerpt:

The city of Jacksonville is about to enjoy the benefits of a credit rating boost. Moody’s Investors Service moved the Florida city’s credit rating to Aa2 from Aa3, citing pension reform among the main reasons for the upgrade. The credit rating increase will allow the state to borrow funds at a lower interest rate and invest in more infrastructure and public services. 

Five years ago, the Jacksonville City Council approved a pension reform package while enacting innovative changes, reducing debt by more than $585 million and adding over $155 million to pension reserves. A key element of the pension reform that led to reduced debt was closing the city’s three pension plans to new public employees in 2017. Since that change was put in place, over $715 million has been used to grow Jacksonville’s economy and invest in public services for its population. In addition, credit rating agencies, such as Moody’s, assign “grades” to governments’ ability and willingness to service their bond obligations, taking into consideration the jurisdiction’s economic situation and fiscal management. Since the pension reform reduced budgetary pressure, it improved the chances of the city getting a credit upgrade. 

Author(s): Jen Sidorova

Publication Date: 1 Jun 2022

Publication Site: Reason

DOJ Antitrust Chief Warns S&P Global Over Insurer Ratings Tweak

Link: https://www.yahoo.com/now/doj-antitrust-chief-warns-p-152645646.html

Excerpt:

S&P Global Inc. should “carefully consider” a proposed tweak to how it assesses the creditworthiness of bonds owned by insurance companies, the Justice Department said, warning that such a change “could raise significant concerns” under U.S. antitrust law.

The Justice Department’s antitrust division said in a letter dated last Friday that a proposed methodology change by S&P — the world’s largest credit ratings company — could raise barriers for its rivals. The changes could end up hurting the credit grades of insurance companies that invest in bonds that aren’t rated by S&P.

The firm should “carefully consider whether penalizing insurers that purchase securities rated by S&P’s competitors has the potential to raise barriers to entry and expansion by competitors, insulate S&P from competition, or otherwise suppress competition from rival rating agencies,” said antitrust chief Jonathan Kanter in the letter. “Such actions could raise significant concerns that the Sherman Act has been — or will be — violated and warrant additional scrutiny.”

Author(s): Leah Nylen

Publication Date: 4 May 2022

Publication Site: Yahoo (Bloomberg)

Risk-Based Rating in Personal Lines Insurance

Link: https://www.youtube.com/watch?v=IPYSSZkP-Oo&ab_channel=RStreetInstitute

Video:

Description:

The insurance industry is unique in that the cost of its products—insurance policies—is unknown at the time of sale. Insurers calculate the price of their policies with “risk-based rating,” wherein risk factors known to be correlated with the probability of future loss are incorporated into premium calculations. One of these risk factors employed in the rating process for personal automobile and homeowner’s insurance is a credit-based insurance score.

Credit-based insurance scores draw on some elements of the insurance buyer’s credit history. Actuaries have found this score to be strongly correlated with the potential for an insurance claim. The use of credit-based insurance scores by insurers has generated controversy, as some consumer organizations claim incorporating such scores into rating models is inherently discriminatory. R Street’s webinar explores the facts and the history of this issue with two of the most knowledgeable experts on the topic.

Featuring:

[Moderator] Jerry Theodorou, Director, Finance, Insurance & Trade Program, R Street Institute
Roosevelt Mosley, Principal and Consulting Actuary, Pinnacle Actuarial Services
Mory Katz, Legacy Practice Leader, BMS Group

R Street Institute is a nonprofit, nonpartisan, public policy research organization. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government.

We believe free markets work better than the alternatives. We also recognize that the legislative process calls for practical responses to current problems. To that end, our motto is “Free markets. Real solutions.”

We offer research and analysis that advance the goals of a more market-oriented society and an effective, efficient government, with the full realization that progress on the ground tends to be made one inch at a time. In other words, we look for free-market victories on the margin.

Learn more at https://www.rstreet.org/
Follow us on Twitter at @RSI

Author(s): Jerry Theodorou, Roosevelt Mosley, Mory Katz

Publication Date: 4 April 2022

Publication Site: R Street at YouTube

Moody’s upgrades Illinois’ credit rating

Link: https://capitolnewsillinois.com/NEWS/moodys-upgrades-illinois-credit-rating#new_tab

Excerpt:

Illinois received its first credit rating upgrade in 23 years on Tuesday when Moody’s Investors Services raised the state’s rating one notch, citing “material improvement in the state’s finances.”

Although the upgrade still leaves Illinois bonds rated just two notches above so-called “junk” status, Gov. JB Pritzker said it marked a turning point for the state, and he credited the General Assembly and members of his own administration for bringing greater fiscal discipline to the state’s budget.

Author(s): PETER HANCOCK

Publication Date: 29 June 2021

Publication Site: Capitol News Illinois

Near-Junk Illinois Set to Sell Bonds With Stimulus as ‘Tailwind’

Link: https://www.msn.com/en-us/money/markets/near-junk-illinois-set-to-sell-bonds-with-stimulus-as-e2-80-98tailwind-e2-80-99/

Excerpt:

Illinois plans to tap the municipal-bond market next week, just days after passage of President Joe Biden’s $1.9 trillion stimulus plan promises to help the lowest-rated state with some near-term financial stress.

The state is expected to sell $1.26 billion tax-exempt bonds on March 17. That follows S&P Global Ratings’s decision to pull Illinois back from the brink of a junk rating by lifting the outlook on the state’s BBB- rating to stable from negative on Tuesday, citing more federal aid and the start of an economic recovery. The proceeds from the sale will be for capital projects, accelerated pension payments and refunding.

Author(s): Shruti Date Singh

Publication Date: 10 March 2021

Publication Site: MSN (Bloomberg)