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Daily Insurance Industry News
Monday 22nd of January 2018
April 8, 2008

Fitch downgrades MBIA credit rating

by Gill Montia

Story link: Fitch downgrades MBIA credit rating

Credit rating agency, Fitch, has downgraded the financial strength ratings of bonds insurer, MBIA, from “AAA” to “AA”.

Fitch placed MBIA on “rating watch negative” in early February and has now changed this to “rating outlook negative”.

MBIA’s reserves of around $16 billion are between $3.4 billion and $3.8 billion short of the level needed for Fitch to consider the company worthy of its “AAA” rating.

According to Fitch, the reserves need to take account of rising defaults among mortgage holders.

The level of defaults has led to concerns that insurers such as MBIA will face a hike in claims this year, as bonds backed by mortgages lose value.

The company insures around $680 billion in bonds and has recently raised around $2.6 billion to cover a potential rise in claims.

Earlier this year, MBIA suspended writing new business on certain structured finance risks and expects the move to help it build up further capital.

However, Fitch believes MBIA will remain at risk until its subprime risk can be stabilised.

The agency expects losses on MBIA’s structured finance portfolio to fall within a range of $3.1 billion to $4.9 billion.

 

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