FOR ANY INSURANCE COMPANY,
THE MANAGEMENT AND MITIGATION
OF CREDIT RISK form the foundation upon which success and longevity are built. National Public Finance Guarantee Corp.'s risk management practices and systems reflect the lessons learned by the team from more than three decades of underwriting municipal credits during every type of economic and market environment.
The risk culture at National is driven by four key goals: transparency, open dialogue, long-term perspective, and attention to detail. Transparency refers to clearly articulated risk selection criteria for every risk type we underwrite; open dialogue means open debate on the merits of a transaction is encouraged at all levels of the firm with voters obligated to vote solely on their judgment and not on business considerations; long-term perspective means that all transactions must be strong enough to survive anticipated and unexpected economic and market environments given the very long life of insured transactions; and finally, attention to detail means that every transaction must be carefully underwritten based on fundamental credit and legal analyses.
National's risk management process is run by an independent team reporting directly to National's CEO. This provides an independent "check and balance" for the underwriting of all new business. First, transactions must comply with National's core principles and sector-specific criteria. Based on size and complexity, a transaction is either reviewed by the Underwriting Committee or the Risk Oversight Committee, both of which are chaired by a member of National's Risk Management Department. The Underwriting Committee reviews transactions secured by the general funds of an issuer or by water or sewer revenues up to a predetermined exposure amount. All other transactions are reviewed by the Risk Oversight Committee. Analysts skilled in the relevant sector and risk type prepare a credit package for each transaction which is reviewed by the appropriate committee. Once a transaction is insured, it is actively monitored throughout its life by an experienced surveillance team in order to identify and remediate potential problems as early as possible.