Moody's Investors Service said yesterday that bond insurers' recent mark-to-market losses on credit default swaps "may not represent a true indicator of actual credit deterioration," providing some support to the insurers' claims that unrealized losses from CDS on their balance sheets are likely higher than losses could be from actual claims.

However, Moody's warned that the unrealized losses represent more than just accounting "noise" because they show insurance on the same risk exposure would require a bigger premium today, and that weakened balance sheets could reduce insurers' ability to gain business and raise capital.

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