UPDATE 1-Australia's Macquarie to form U.S. muni insurer

(Recasts with confirmation, adds comment from insurance superintendent, details, byline)

By Joan Gralla

NEW YORK, June 5 (Reuters) - Australia's Macquarie Group is creating a U.S. bond insurance arm, New York's state insurance superintendent said on Thursday, one day after two insurers were warned they may lose their top ratings.

Insurance Superintendent Eric Dinallo said he has been discussing the new enterprise with Macquarie, Australia's top investment bank, since April. "They have advised us that they wish to enter this market and are currently undertaking the application process," Dinallo said in a statement.

"We welcome Macquarie's decision to form a bond insurer and will continue to work with interested parties to add capacity to this market," he added.

A New York-based Macquarie spokesman declined to comment.

Until a handful of bond insurers imperiled the "AAA" ratings that investors want by backing subprime mortgages, about half of all muni bonds were insured. The insurers' problems -- from raising new capital to restoring investor confidence -- has created an opening for new insurers.

On Monday, The New York Times ran a legal advertisement, a "Notice of Intention to form Stock Insurance Company," that described the formation of a "Municipal and Infrastructure Assurance Corporation."

The advertisement said the amount of proposed capital would be $2.5 billion and the principal office located in New York; it did not name any company.

A move by Macquarie into providing insurance for municipal bonds would follow a similar move by Warren Buffett's Berkshire Hathaway Inc (BRKa.N) late last year. Berkshire Hathaway, whose businesses include reinsurer General Re, formed its bond insurance unit in December as credit rating agencies were reviewing ratings on existing insurers on concerns they would not be able to cover losses on the bonds they guarantee.

New York was the first state to grant a license to Berkshire Hathaway Assurance Corp.

Private equity firm Ripplewood Holdings also might start a bond insurer, the New York Post said on May 28.

The list of troubled insurers includes Ambac Assurance Corp (ABK.N), MBIA (MBI.N) and Financial Guaranty Insurance Co.

Bond insurance reduces the perceived risk of owning a municipality's debt, which can help attract more investors and result in lower borrowing costs -- which ultimately saves taxpayers money.

The tax-free bond sector has an exceptionally low default rate of under 1 percent, which means this business can be both profitable and low-risk. Municipal bonds benefit from insurance because it equalizes the tens of thousands of individual credits and cuts the research burden. (Editing by Leslie Adler)