By Darrell Preston
Feb. 24 (Bloomberg) -- Municipal & Infrastructure Assurance Group, an insurer set up by Macquarie Group Ltd. and Kenneth Griffin’s Citadel Investment Group LLC, is seeking to sell municipal bond insurance in all U.S. states and territories.
The venture, which received a license from New York state in October, joined a program sponsored by the National Association of Insurance Commissioners aimed at speeding up licensing in 56 states and territories, the company said today in a news release. Municipal & Infrastructure Assurance said it plans to guarantee only municipal bonds.
“We plan to deploy our significant capital base against sound municipal risks,”Richard Kolman, the insurer’s executive vice chairman and former co-head of Goldman Sachs Group Inc.’s municipal bond department, said in the release. Municipal & Infrastructure Assurance intends to “play a central role in rebuilding the capacity in the bond insurance industry,” Kolman said.
The global credit crisis has left all but one bond insurer ranked below AAA by at least one ratings company as losses mounted on securities tied to subprime mortgages and other loans. Municipal borrowers use insurance to obtain higher ratings that they can use to cut borrowing costs.
Municipalities used insurance on 18 percent of the bonds they sold in 2008, down from 47 percent in 2007, according to data compiled by Thomson Reuters.
New York License
To fill the void, Macquarie, Australia’s largest securities firm, and Chicago-based hedge-fund firm Citadel won a license to insure municipal debt in New York last year. Sydney-based Macquarie manages and finances infrastructure projects around the world.
The firm is following Warren Buffett’s AAA rated bond insurer, Berkshire Hathaway Assurance Corp., in seeking an expedited license, a process set up last year after other insurers’ ratings were lowered.
Municipal & Infrastructure Assurance said it’s still waiting to receive ratings it will need to sell insurance to state and local governments that borrow in the municipal bond market.
Armonk, New York-based MBIA Inc., the largest bond insurer, said earlier this month it’s splitting its municipal bond insurance business from other types of debt it guarantees. The company said it transferred guarantees on about $537 billion of municipal bonds to MBIA Insurance Corp. of Illinois, which it plans to rename National Public Finance Guarantee Corp.
To contact the reporter on this story: Darrell Preston in Dallas atdpreston@bloomberg.net.
