Following Detroit's filing of a petition for protection under Chapter 9 of the U.S. Bankruptcy Code, investors have raised questions about the impact that potential claims and insured portfolio credit deterioration could have on bond insurers. Standard & Poor's Ratings Services addresses this issue in a report titled, "U.S. Bond Insurers' Detroit Insured Par Exposure Presents Manageable Risk."
"Although any default creates pressure on capital adequacy, based on our analysis of the bond insurers' capital positions, we do not expect to take any rating actions on them because of a default by Detroit," said Standard & Poor's credit analyst David Veno.
The agency will continue to monitor Detroit's Chapter 9 filing and its impact on the bond insurers as the situation develops and it may revise its view if it believes the liquidity or capital of the bond insurers comes under stress.