Assured Warranty faces $10 billion publicity to water utilities

US insurer Assured Warranty has over $10 billion publicity to a number of of the UK’s most troubled water utilities, in line with a report printed right this moment in The Monetary Instances (FT).

The New York-listed insurance coverage corporations might find yourself on the hook to lenders within the case of defaults or missed curiosity funds by corporations together with Thames Water and Southern Water. Dealing with pressures from inflation and elevated regulatory consideration, these UK water corporations are labouring below £60 billion in debt, in line with the report.

In an emailed assertion to the FT, Nick Proud, a senior managing director at Assured Warranty, mentioned: “We really feel the UK water firm debt now we have insured has a powerful credit score profile, because it supplies a necessary public service and is in a well-regulated business the place we assure the senior stage debt, all of which has underlying funding grade scores. Thus far, a UK water firm has not defaulted on their debt.”

The FT revealed that, in line with outcomes printed in March, the group has constructed up an publicity of about $1.9 billion to Thames Water alone, with Southern Water its largest non-US publicity at $2.2 billion. The outcomes additionally present that Anglian Water, Yorkshire Water and Dŵr Cymru Welsh Water are all amongst its prime 10 non-US holdings.

The report famous that Assured Warranty has been accelerating its exercise within the UK water sector over the previous 18 months, saying a brand new deal to offer cowl to lenders to Portsmouth Water in June, whereas final yr it agreed to offer liquidity amenities to Yorkshire Water.

The outlook for UK water corporations

The FT highlighted that ranking company S&P has destructive outlooks for about two-thirds of the UK water corporations it charges. And Fitch Rankings downgraded Southern Water’s credit standing on Friday, whereas sustaining a destructive outlook.

The UK authorities has been mentioned to have mentioned plans to place failing water corporations right into a “particular administration regime”, whereas UK water regulator Ofwat is carefully monitoring the monetary well being of 5 UK corporations — Thames Water, Southern Water, SES Water, Portsmouth Water and Yorkshire Water.

The report famous that Thames Water, Southern Water and Yorkshire Water every secured commitments from shareholders to place in a whole lot of tens of millions of kilos of extra funding in current weeks in a bid to shore up their funds.

Assured Warranty’s publicity

The report additionally revealed Assured Warranty’s publicity to UK water corporations is almost equal to the group’s whole “claims-paying sources”, which stood at $10.8 billion on the finish of March.

The insurer carries robust credit score scores of AA and A1 from S&P and Moody’s respectively.

In his assertion to the FT, Proud mentioned that Assured Warranty had a “lengthy historical past of efficiently mitigating potential losses” and famous that the group had maintained “a comparatively fixed stage of claims paying sources over the previous 15 years”.