FIGA Finance and Audit Committee Recommends Relaxing Investment Policy Subsequent to Standard and Poor’s U.S. Government Debt Rating Downgrade

Aug 23, 2011


The Florida Insurance Guaranty Association (“FIGA”) Finance and Audit Committee (“Committee”) met this morning, August 23, 2011, to make a recommendation to the FIGA Board of Directors (“Board”) on how to address FIGA’s investment policy in light of Standard & Poor’s recent rating downgrade of U.S. government debt.  Currently, FIGA policy would prohibit any purchase of U.S. government debt due to the downgrade. 

The Committee recommended that the Board adopt a policy to allow FIGA’s investment advisors to purchase U.S. government guaranteed debt, regardless of its rating.  This recommendation is based upon the belief that the U.S. guarantee of government’s debt makes it still one of the safest investments available today.  Further, the inability to purchase U.S. government debt is considered to be too restrictive on investment managers. 

During the meeting, the question was posed as to whether the proposed exemption to rating requirements should extend to other U.S. government securities, such as investments in agencies like Sallie Mae and Freddie Mac, which are not guaranteed by the U.S. government, or to sovereign debt guaranteed by other nations.  In the interest of providing FIGA’s investment managers with the necessary flexibility to manage its investments appropriately, the Committee decided to only advance the recommendation related to U.S. government guaranteed debt in order to allow more time for research and commentary on relaxing requirements related to non-guaranteed U.S. government securities.   

It was also noted that there is an upcoming mandatory review of FIGA’s investment practices, at which time the issue related to non-guaranteed U.S. government securities and sovereign debt guaranteed by other nations will be evaluated.

The Committee urged immediate Board adoption of the aforementioned recommendation immediately, so FIGA’s investment managers can begin to purchase U.S. government debt again in two weeks. 


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