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New municipal bond insurance platform Build America Mutual created
By Angela McDaniels
Tacoma, Wash., July 23 - White Mountains Insurance Group, Ltd. announced the launch of a new U.S. municipal bond insurer, Build America Mutual Assurance Co.
Build America is owned by municipal issuers and is led by co-founders Robert Cochran, managing director and chairman of the board, and Sean McCarthy, managing director and chief executive officer. Both were formerly with Financial Security Assurance.
Build America expects to write its first policies in September, White Mountains chairman and CEO Ray Barrette said in a White Mountains news release.
Build America is the only mutual bond insurer in the financial guaranty industry, according to the news release. It is rated AA/stable by Standard & Poor's and regulated by the New York Department of Financial Services.
White Mountains said it capitalized HG Global Ltd. with about $600 million to fund Build America through the purchase of about $500 million of Build America surplus notes.
HG Re Ltd. provides 15%-of-par, first loss reinsurance protection for policies underwritten by Build America, and HG Re's obligations to Build America are collateralized in New York trusts. HG Re has contributed $300 million of Build America surplus notes and $100 million of cash to the collateral trusts as initial reinsurance capital support.
HG Global has filed a patent application covering this structure, according to the release.
White Mountains said the reinsurance treaty between Build America and HG Re is continuous with limited amendment provisions.
White Mountains owns 98% of HG Global's preferred equity and 89% of its common equity, and management owns the remaining equity. White Mountains expects to syndicate about $110 million of its investment to interested investors in the near future.
White Mountains is a financial services holding company based in Hamilton, Bermuda.
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