The fortunes of the current bond insurers continued to fall yesterday, as the ratings of Financial Guaranty Insurance Co. and CIFG Assurance NA slid further down the scale.

Moody's Investors Service slashed the insurer financial strength rating for FGIC to Baa3 from A3 and kept it on review for possible downgrade.

"These rating actions reflect the company's inability to date to raise new capital, the increased likelihood of FGIC breaching minimum regulatory capital requirements, and the effects of its current inability to upstream dividends without prior regulatory approval," Moody's said in a release.

Meanwhile, Fitch Ratings knocked down the insurer financial strength ratings for CIFG Assurance NA to A-minus from AA-minus and moved the company to negative outlook.

"The downgrade of CIFG and its affiliates is based on Fitch's updated assessment of CIFG's capital position, a review by Fitch of CIFG's updated business plan, consideration of various qualitative ratings factors, and an update on Fitch's current views of U.S. subprime related risks," Fitch said in a release.

Spokesmen for both insurers declined to comment.

The downgrade to FGIC marks the third in the past three business days for what had been the market's third-busiest bond insurer. On Thursday, Fitch sent the financial guarantor to BBB and then on Friday, Standard & Poor's downgraded FGIC six notches to BB from A. Both remain on negative outlook.

The Moody's downgrade mentions the increased likelihood that FGIC could breach regulatory requirements for capital. Last week, FGIC released its consolidated financial statement for last year, which shows that it increased its total loss and loss adjustment expense to $1.267 billion at the end of 2007.

To raise that amount, FGIC tapped into its statutory capital and surplus and reduced the pool to $261 million from $1.13 billion, a move that could place the company in a poor light with the state insurance department. As of the end of 2007, FGIC's aggregate net liability exceeds the risk limit prescribed by New York State insurance law.

Also yesterday, the National Association of Insurance Commissioners announced that Berkshire Hathaway Assurance Corp. is now licensed in 45 jurisdictions. The licensing process took just six weeks and was coordinated through a common application done through the NAIC.

To date, BHAC is still not licensed in Idaho, Massachusetts, Minnesota, New Mexico, North Carolina, Puerto Rico, or any other territory, according to the NAIC.

 

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