MIAC OK'd For License Speed-Up

New muni-only bond insurer Municipal and Infrastructure Assurance Corp. has received approval to participate in the National Association of Insurance Commissioners' pilot program that will expedite the insurance licensing process in all 56 member jurisdictions, the company announced this morning.

MIAC, which is co-sponsored by Macquarie Group and Citadel Investment Group, received a license from New York in September. Berkshire Hathaway Assurance Corp. used the NAIC expedition process to speed its own licensing process when it entered the market last year.

MIAC executive vice president Richard Kolman called the NAIC approval a "key milestone".

"It accelerates our application to receive the licensing necessary to commence providing the new bond insurance capacity that is so urgently needed by the municipal market," he said in a statement. "Participants across the U.S. public finance market continue to emphasize strong demand for new long-term credit enhancement capacity from a clean, well-capitalized bond insurer unencumbered by legacy structured finance exposures."

Bond insurance capacity has plummeted in the municipal market due to the downgrades of financial guarantors. As many issuers struggle to access the market amid the broader credit crunch, calls for some solution to the lack of available credit enhancement have grown. Although typically known as protecting investors against default, bond insurance helped the market in many other ways, such as providing liquidity.

A panel commissioned by the National League of Cities has begun looking into the possibility of starting a federal, mutually owned credit enhancer.

Rep. Gerald Connolly, D-Va., has suggested the federal government could directly guarantee municipal credits, help fund a mutual insurer, or repackage muni credits into some sort of Treasury securities.

MBIA Inc. has restructured its subsidiaries and recapitalized MBIA Insurance Corp. of Illinois as its U.S. public finance-only insurer, while Ambac Financial Group Inc. is working on plans to start up muni-only insurer Everspan Financial Guaranty Corp., the old Connie Lee Insurance Co.

Both MBIA and Ambac have asked for federal assistance, such as capital injections, but Treasury Department officials told reporters earlier this month it had no plans to provide direct aid to insurers.

MIAC has said it can provide a private solution to a public problem. It plans to focus primarily on the primary market, while serving a broad range of issuers from small school credits to large state issuers.

"When businesses fail in important industries that have sound long-term fundamentals, private enterprise will respond by providing fresh capital for new entrants who are positioned to fill the vacuum created by failed businesses and avoid the mistakes of the past," Kolman said.

An NAIC working group said it approved MIAC's participation in the pilot program because of the need of bond insurance capacity to help stimulate the municipal market.

New York Insurance Department superintendent Eric Dinallo applauded the decision.

"MIAC's approval for the NAIC pilot program is consistent with our goal of seeking to normalize the bond insurance industry by attracting fresh capital and new players to underwrite the issuance of municipal bonds that will help build bridges and schools across our nation," Dinallo said in a statement. "We were pleased to provide our support to the NAIC to facilitate their approval of MIAC for the pilot program."

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