Dinallo races to bolster bond insurers
Efforts to bail out bond insurers may be too late to prevent a ratings downgrade, a research firm says.
The New York insurance superintendent’s plan to bail out bond insurers may be too late to prevent a ratings downgrade, according to Bloomberg.
Eric Dinallo, New York’s insurance regulator, plans to pool $15 billion in capital from banks and securities firms to help the insurers, according to a report from bond research firm CreditSights Inc.
But efforts to pull that money together will probably be overtaken by other events, and the rating agencies will have downgraded the companies by then, CreditSights said.
Fitch Ratings has already downgraded on Ambac Financial Group and Security Capital Assurance Ltd. Financial Guaranty Insurance Co., the fourth largest insurer, may also have its ratings on the cutting board, as Fitch weighs whether the company has sufficient capital to maintain its AAA rating.
CreditSights predicts a decrease in ratings, Bloomberg reported.
Salvation for the bond insurers will have to come from the regulatory side, but in the meantime, millionaire investors such as Wilbur Ross — who is reportedly interested in buying Ambac — will provide lifelines through cash infusions, CreditSights said.
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