The New York State Insurance Department said yesterday a deal has been struck that insures the solvency of Financial Guaranty Insurance Company (FGIC) and protects the company's book of municipal bonds.

Under the agreement, announced late yesterday after stock markets closed, Armonk, N.Y.-based MBIA Inc. will provide reinsurance for $184 billion of municipal bonds currently insured by New York-based FGIC. According to MBIA, the company will receive unearned upfront premiums, net of ceding commission paid to FGIC, of approximately $741 million.

The deal was struck after an auction undertaken at the direction of, and overseen by, the New York State Insurance Department that sought reinsurance for the bulk of FGIC's municipal bonds.

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