MBIA to reinsure $184 billion in FGIC public finance policies

By Sheri Kasprzak

New York, Aug. 27 - MBIA Insurance Corp. has agreed to provide reinsurance to public finance insurance policies totaling about $184 billion, statements from both parties said Wednesday.

The agreement makes MBIA liable for any claims for payment made under the FGIC policies.

"FGIC believes that this reinsurance transaction will benefit all policyholders and will substantially strengthen FGIC's statutory financial position," said a statement from FGIC.

The portfolio, an MBIA statement said, includes mostly investment-grade credits in general obligation, water and sewer, tax-backed and transportation sectors. The portfolio, the statement noted, does not include any credit default swap contracts, below-investment-grade credits or other credits "inconsistent with MBIA's credit underwriting standards."

The transaction is expected to close in late September.

"As we discussed in a recent letter to owners, one of our strategies is to pursue opportunities that support the bond insurance market as a whole," said Bill Fallon, MBIA's managing director, in a news release.

"To that end, we are pleased to provide a comprehensive risk transfer solution for the majority of FGIC's public finance portfolio. This transaction will provide substantial benefits to the policyholders of FGIC, who can now rely on MBIA's financial strength."

FGIC has suffered a few beatings this year from the ratings agencies and was most recently downgraded to junk by Fitch Ratings after the bond insurer's residential mortgage-backed securities collapsed.

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