Several insurers maintained holdings of Detroit municipal bonds as of the end of 2012, SNL Financial data show.
Filings by these insurers indicated that these bonds represented relatively small percentages of their investment portfolios, with some insurers noting that much of their municipal portfolios were insured. Rating agencies have downgraded many Detroit bonds to junk status, as they consider it likely that the terms of the bonds will be revised to the detriment of creditors as the restructuring process unfolds.
Insurers' holdings of Detroit municipal debt appeared to consist largely of water and sewer bonds, according to SNL Financial. Fairfax Financial Holdings Ltd. held, by a substantial margin, the largest amount of Detroit securities as of December 31, 2012. SNL Financial said that its data showed that the holdings largely consisted of water and sewer bonds and were rated NAIC-1, the highest designation.
Fairfax said in its Form 10-K filed March 8 that about $4 billion of its $6.9 billion municipal bond portfolio as of December 31, 2012, was insured by Berkshire Hathaway Assurance Corp. Its Detroit debt had a carrying value of $239.9 million, or about 3.5 percent of the total municipal portfolio, as of the end of 2012.
On the life side, Sammons Enterprises Inc. held the largest amount of Detroit bonds, with all its holdings consisting of debt backed by Detroit's schools. The debt is rated NAIC-1.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].