The New York State Insurance Department said today it has licensed a new bond insurer, Municipal and Infrastructure Assurance Corporation (MIAC), backed by Australian and U.S. financial firms.
The department statement said MIAC is sponsored by Sidney, Australia-based Macquarie Group, a financial services firm that manages and finances public infrastructure assets on a global basis.
Macquarie Group, the department said, has informed the agency it has entered into a joint sponsorship agreement with Chicago-based Citadel Investment Group, the hedge fund management firm founded by billionaire trader Kenneth C. Griffin.
Citadel has agreed to co-sponsor MIAC subsequent to its being licensed and contingent on receiving any necessary department approvals, the announcement said.
Licensing the new insurer, the department said, is part of its three-point plan for the bond insurance industry, which has seen its major players all face rating downgrades and liquidity problems sparked by the collapse of the subprime mortgage market.
Earlier this year, at the urging of New York Insurance Superintendent Eric Dinallo, billionaire Warren Buffet agreed to have the Berkshire Hathaway Assurance Corp. he controls insure municipal bonds through a 100 percent-owned subsidiary of BHAC.
Mr. Dinallo said in a statement that MIAC will be authorized to write financial guaranty insurance policies for municipal and infrastructure bonds.
"Especially in today's turbulent credit market, any option that helps municipalities throughout New York and the nation save taxpayers money is welcome. Municipal bonds help build our bridges and our schools," said Mr. Dinallo.
The entry of the new insurer, he added, will help "keep the bond insurance market vibrant and competitive, and that helps our cities and towns lower the cost of issuing bonds."
Mr. Dinallo commented further that, "under Gov. David Paterson's leadership, we have worked to bring more than $10 billion in new capital into this market. We expedited MIAC's application for licensing and we welcome its entry into the bond insurance market."
The department said its current plan for strengthening the bond insurance sector involves:
o Bringing in new capital and new players to ensure a competitive market, providing bond insurance to those who need it. To date, the department said it has facilitated the addition of $10 billion in capital.
o Protecting the policyholders of the distressed companies by finding solutions, including reinsurance for the municipal bonds.
o Developing new rules for the bond insurers to prevent similar problems in the future.
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