PFS Financing is marketing a $300 million securitization of insurance premium finance loans, according to Standard & Poor’s.
PFSFC 2015-A, as the issuer’s latest deal is called, will issuer $282 million of AAA’ rated, class A notes and $18 million of A’ rated class B notes. All of the notes mature on April 16, 2018.
The notes area backed by short-term loans used to finance the purchase of commercial property and casualty insurance policies. Loans included in the 2015-A pool range in size; those larger than $500,000 represent the largest share of the pool (16%).
Property and casualty insurance policies for businesses typically require a full, one-year premium to be paid at or near the beginning of the policy period. The premium finance loan enables the policy-holder to spread payments over the course of the policy instead of paying the entire premium up front. Loans are paid on installments with over a term of less than one-year. Over 90% of the loans in the 2015-A pool have nine installment payments or fewer.
The loans are used to finance a wide variety of policies that cover general liability, commercial property, professional liability, and automobile insurance.
The security for the loans is the unearned premium balance that the insurance carrier owes in the event that the underlying policies are cancelled. “As a result, we do not analyze the borrowers, but instead focus on the credit quality of the insurers providing the underlying policies,” S&P stated in the presale report.
PFS Financing plans to use proceeds from the securitization to redeem its series 2013-B notes.