Fitch Ratings said today that despite infusions of capital, the “AAA” ratings of Armonk, N.Y.-based MBIA Inc. and the bond insurer’s financial guaranty subsidiaries were being placed on Rating Watch Negative.

The firm said its rating action follows a decision to update certain modeling assumptions in its ongoing analysis of the financial guaranty industry.

Fitch’s action came as Standard & Poor’s, examining the effects of the subprime market collapse, said that huge writedowns recorded by Citigroup and other banks may have reduced exposures, but “potentials for additional write-downs cannot be ruled out,” especially if the situation for bond insurers continues to deteriorate.

Fitch said it believes it is possible that modeled losses for structured finance collateralized debt obligations (SF CDOs) could increase materially as a result of these updated projections.

The need to update loss assumptions at this time, Fitch said, reflects the “highly dynamic nature of the real estate markets in the U.S., and the speed with which adverse information on underlying mortgage performance is becoming available.”

Fitch said it expects that both simulated capital model losses and expected losses will increase materially for MBIA because of the company’s significant SF CDO exposure within its insured portfolio, which was $30.6 billion of net par outstanding as of Sept. 30, 2007.

The company added that it believes a sharp increase in expected losses would be especially problematic for the ratings of MBIA–even more problematic than previously discussed increases in “AAA” capital guidelines, which has been the primary focus of recent analysis of the industry.

Expected losses reflect an estimate of future claims Fitch said would ultimately need to be paid by a guarantor. A material increase in claim payments would be inconsistent with “AAA” ratings standards for financial guarantors, and could potentially call into question the appropriateness of “AAA” ratings for those affected companies, regardless of their ultimate capital, the agency added.

Fitch noted that MBIA has already raised $1.5 billion of new capital through surplus notes and a direct equity investment from Warburg Pincus, with an additional $500 million equity investment through a rights offering backstopped by Warburg Pincus to close by the end of the first quarter of 2008.

However, Fitch currently believes that these additions to capital might not be sufficient to address the necessary capital needed to maintain MBIA’s “AAA” IFS rating. Fitch said it will update the Rating Watch Negative status on MBIA and its competitors as its conclusions are reached.

The latest action comes amid continuing reports that banks and regulators are working to come up with financial support plans for troubled bond insurers. So far, no final arrangements have been completed.

MBIA Inc. is a U.S. holding company whose primary operating subsidiary–MBIA Insurance Corp. and MBIA UK Insurance Ltd.–provide financial guaranty insurance and other forms of credit enhancement throughout the United States and internationally.

As of Sept. 30, 2007, MBIA Inc. reported consolidated assets under Generally Accepted Accounting Principles of $45.3 billion and shareholders’ equity of approximately $6.5 billion. On an aggregated basis, net par outstanding for MBIA totaled $673 billion as of Sept. 30, 2007.