Insurance premium finance loans, and the right to receive unearned premium amounts from insurance policies as collateral, will act as collateral for $650 million in asset-backed securities from the PFS Financing Corp., series 2024-A and 2024-B.
Both series will issue A and B classes of notes through two tranches, according to a pre-sale report from Moody's Investors Service.
The Series 2024-A notes have a legal final maturity date of Jan. 18, 2028 on both tranches of notes. They have hard credit enhancement levels of 10.0% and 4.25% on the Class A and B notes, respectively. The Series 2024-B the levels of hard credit enhancement are the same as the concurrent series, but they have a legal final maturity date of Feb. 15, 2029.
A revolving pool of granular and diverse loans backs the revenue stream securing the series of notes, which is one of the deal's positive credit characteristics, according to Moody's. The notes will be priced over the one-month Secured Overnight Financing Rate (SOFR), Moody's said. The rating agency will assign Aaa to the class A notes, but not rate the class Bs, it said.
Loans were originated in all 50 states and Canadian provinces, but 54.34% of the loan borrowers were concentrated in four states.
One of the deal's other key strength is the nature of the insurance premium finance loans. Most of the borrowers are small- and medium-sized companies, and property and casualty policies are important to those borrowers. Therefore, they have a lot of incentive to service the debt, Moody's said. Should a borrower default on the debt, the servicer, IPFS, will cancel the insurance policy and issue a refund to the issuer for the unearned premiums paid to the insurance company that issued the policy.
The securitized amount references a pool of $6.07 billion in insurance premium finance loans, Moody's said. Of that, the collateral pool has 462,388 accounts, with an average current receivables balance of $13,122.
UMB Bank is on the deal as trustee and backup servicer, Moody's said.
