KBRA releases commentary on Assured Guaranty Ltd. (Assured) amid two significant events: the final settlement of a material portion of its exposure to Puerto Rico, and the onset of the Russia-Ukraine war, both of which have potential ongoing ramifications for Assured’s financial position.

Key Takeaways

• The Modified Eighth Amended Plan of Adjustment became effective on March 15, 2022. Depending on the security and vintage, Puerto Rico general obligation (GO) bondholders received recoveries of between 60% and 80%. This is a significant milestone in the multiyear process to restructure the debt obligations of the Commonwealth.
• The settlement restructures approximately $1.2 billion of outstanding Puerto Rico general obligation and other related bonds insured by Assured subsidiaries—or 34% of Assured’s total insured net par outstanding of exposure to the Commonwealth as of year-end 2021. This largely eliminates significant uncertainty regarding future liability on this portion of Assured’s insured portfolio and partly mitigates potential future demands on its financial resources.
• Assured has no direct exposure to Russia or Ukraine but will have to manage through indirect impacts arising from the geopolitical fallout of the conflict on both its invested assets and insured portfolio, a hazard that grows as the conflict continues. Supply chain disruptions and rising inflation pressures could put stress on some public finance sectors, while rising interest rates and capital market uncertainty may increase demand for bond insurance and spur new business growth.

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Related Publications

• Some (Re)insurers Will Feel the Pain of Russia-Ukraine War
• Private Equity Investment in the Life-Annuity Market Is Here to Stay
• KBRA Commentary on the Current ESG Ratings Market

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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