July 23 Another default by bankrupt Detroit
would add capital pressure to U.S. bond insurers, but Standard &
Poor's Ratings Services said on Tuesday it does not currently
expect such a default to lead to ratings actions on the
Of the five insurers that S&P rates, those with the greatest
exposure to Detroit's bonds are Assured Guaranty Ltd and
National Public Finance Guarantee Corp, with $2.2 billion and
$2.3 billion of net par exposure, respectively.
Even before Detroit filed for bankruptcy on Thursday, the
insurers had high capital charges from exposure to Detroit's
bonds. S&P had already included those charges in its latest
analysis of the insurers.
Berkshire Hathaway Assurance Corp is also facing $901
million net par exposure. But that risk relates to policies in
which its coverage was wrapped over another insurer, so the
primary insurer would have to fail before BHAC would be required
to pay, S&P noted.
Radian Asset Assurance Inc's $7.9 million of exposure to
Detroit was assumed business from Assured. And Build America
Mutual Assurance Co has no exposure to the insolvent city.
"At this time we do not expect a possible default by Detroit
on bonds supported by insurers we currently rate to result in
any rating actions," S&P said.
"However, we may need to revise our view if we believe the
liquidity or capital of the bond insurers comes under stress."