Tuesday, April 1, 2008 4 comments ++[ CLICK TO COMMENT ]++

First Quarter Bond Insurance Plummets

Reuters, quoting Thompson Financial data, provides some detail on first quarter bond insurance use.

Issuance of insured U.S. municipal bonds shrank by about half in the first quarter of the year as the subprime mortgage crisis eroded investor confidence in many guarantors, Thomson Financial said on Tuesday.

Bulls like me believe that some of the shrinkage is temporary, while some is permanent. There is clearly a reluctance by some state governments in using insurance. My guess is that they will avoid insurance for the next 6 months to an year, but will return next year.

FSA more than doubled its market share in the first quarter, to 52.7 percent, even as the overall issuance of insured debt fell to $21.7 billion from $55.1 billion a year ago, Thomson said.

The bond insurance unit of Ambac Financial Group, which held the top spot in the first quarter of last year, saw its market share shrink to 1 percent in January-March from 24.7 percent a year ago, according to Thomson.

MBIA's share shrank to 2.1 percent from 19.4 percent a year ago.

Financial Guaranty Insurance Co, which went from being one of the top-rated insurers to a junk credit in the span of a few months, did not insure any new muni deals, Thomson said. FGIC ranked fourth in insurance market share in the first quarter last year.

Assured Guaranty climbed to the second spot, boosting its market share to 25.9 percent from just 1 percent a year ago.

Not surprisingly, Ambac saw its market share plummet from around 25% to 1%, while MBIA slumped to 2% from 19%.

Some Berkshire bulls, not to mention the monoline shorts, have been saying that Berkshire Hathaway Assurance (BHAC) will slay the existing monolines. So far no sign of Berkshire doing anything. If anything, most of the monolines have faced problems of their own making more so than any attacks from BHAC.

Assuming these market share numbers are reasonably accurate, Berkshire couldn't even manage to dislodge the untarnished, smaller, monolines like Assured Guaranty. It should be noted that Berkshire has been involved in insuring existing deals (to provide multiple insurance for those who need the underlying bonds to maintain high ratings) and this won't be captured in this new issuance market share information.

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4 Response to First Quarter Bond Insurance Plummets

April 1, 2008 at 5:17 PM


I was just checking out people interested in investing and came across your blog. I was a portfolio manager of municipal bonds when MBIA came about.

I write and paint. Take a look at my blog, I think you might find it of interest.


April 2, 2008 at 9:41 PM

I checked your site... one suggestion is to perhaps use labels for different topics. Since you have a blog with diverse elements, I think labels may help...

May 14, 2008 at 5:57 AM

Who should I get in contact with about a states own laws about mortgage broker bonds and as such, how would I get a mortgage bonds form? I life in England and am considering moving to America, don’t know where yet however I was doing some general reading about housing and came across the term mortgage broker bonds and am a little confused, is it a mortgage or a loan to acquire a mortgage?

Also if I want to set up life insurance do I need insurance bonds? Or can I simply open a policy with a company? I’m a little confused by some of the jargon. I am not moving anytime soon but thought I should be aware of things I will need to understand.

July 1, 2008 at 4:24 AM

Insurance bonds are required for a variety of things, Bruce. Life insurance is indeed one instance when a bond may be desireable.

You need to speak to a profressional to better understand the market.

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