Moody's assigns Berkshire insured munis top rating

NEW YORK, Feb 21 (Reuters) - Moody's Investors Service on Thursday said it began assigning "AAA" ratings to municipal bonds insured in the secondary market by a new unit of Warren Buffett's Berkshire Hathaway Inc (BRKa.N).

Buffett last year started a new bond insurer, Berkshire Hathaway Assurance Corp. (BHAC), to guarantee interest and principal on debt by U.S. states, cities and towns.

Berkshire's new unit is not yet rated by Moody's, but its guarantees are backed by a contingent payment insurance policy provided by AAA-rated and Berkshire-owned National Indemnity Company (NICO).

"Moody's believes that NICO is well positioned to assume the contingent payment risks related to financial guaranty insurance written by BHAC," the agency said in a report.

"The rating agency expects BHAC and NICO will develop a diversified portfolio of municipal risks at attractive prices with an overall risk limit that is moderate in relation to NICO's capital base," it added.

When bonds are insured in the secondary market they are placed in a custody account. The custodian then issues a custody receipts associated with new insured obligation. Each receipt is supported by the new insurer and ultimately NICO.

Berkshire guaranteed its first deal in the secondary market in January and Buffett also offered to reinsure $800 billion in muni bonds in portfolios of its embattled rivals that are struggling to retain their top "AAA" ratings. (Reporting by Anastasija Johnson; Editing by Leslie Adler)