The worst-case scenario from the subprime mortgage crisis wouldbe bond insurer defaults, executives with the insurance broker Aonsuggested.

If such an event should occur, the bond insurers' failure tocover losses would spell a serious downturn for the economy, theywarned.

Their observations came as part of a Web seminar titled“Financial Reporting: Consequences of the Mortgage MarketMeltdown,” moderated by Paul Graziano, executive vice presidentAon's industry and product group.

In response to a question from listeners submitted to Mr.Graziano, Scott Van Meter, managing director, Aon financialadvisory and litigation consulting services, said a failure by bondinsurers to cover losses was a worst-case scenario. What is agreater possibility, though still remote, would be a series ofdowngrades to the insurer's ratings.

“[That] would have a terrible impact,” said Mr. Van Meter.

He noted Monday's move by Warburg Pincus, a private equity firm,to inject $1 billion into bond insurer MBIA Inc. with a purchase ofthe company's stock, was one move to keep a downgrade fromhappening.

MBIA, based in Armonk, N.Y., announced yesterday that it wouldnot hold its Friday investor conference call while three ratingagencies are at work on the company's rating.

Bond insurers, said Mr. Van Meter, are worried about their“triple-A” ratings, and the stock markets are reacting with equalconcern reflected by drops in the companies stock prices.

“It will become impossible for them to write [coverage] if theylose their ratings,” he observed.

“[Bond insurers] are under a lot of pressure to keep theirratings,” said Roger Siefert, executive vice president and groupleader of Aon financial advisory and litigation consultingservices.

Xavier Oustalniol, managing director with Aon financial advisoryand litigation consulting services, said a rating decrease couldhave serious economic impact on banks because regulations requirethem to have bond insurance. Without that insurance, they would beunable to lend, which would have a serious ripple effect throughoutthe entire economy.

The Webcast is available at www.aon.com/webseminars.