New York State
Kermitt J. Brooks Acting Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 7/17/2009||FOR IMMEDIATE RELEASE|
The New York State Insurance Department today announced that it has approved the restructuring of Syncora Guarantee Inc. (SGI), allowing the bond insurer to proceed with a series of transactions that will enable it to move from nearly a $4 billion deficit to a surplus of approximately $180 million.
The agreement provides reinsurance for Syncora’s municipal bond business by a newly-formed, well-capitalized subsidiary, Syncora Capital Assurance Inc. The restructuring also includes a $1.2 billion commutation payment to policyholders who entered into credit default swaps on collateralized debt obligations on asset backed securities. Finally, the deal reduces SGI’s mortgage-backed security liabilities through a voluntary tender process that offered upfront cash payments to policyholders in exchange for their insurance claims. Nearly 70% of the tender offers were accepted.
“This agreement protects municipal bond and other policyholders and permits the reduction of company liabilities in a fair and equitable manner. The agreement also enables the company to avoid receivership and the disruption that it would cause,” said Acting Insurance Superintendent Kermitt Brooks.
“The Insurance Department is pleased with this agreement because it represents the culmination of more than a year and a half of effort to stabilize the bond insurance market by working with each of the major bond insurers.”
Completion of the Syncora restructuring means that substantially all New York domestic municipal bond insurance policies have been stabilized as a result of the Insurance Department’s efforts since it announced a three-point plan to do so in late 2007. The plan called for alleviating problems facing bond insurers, attracting new capital into the market and developing new regulations.
The Insurance Department helped develop individual solutions to stabilize each of the major bond insurers, including Syncora, MBIA, FGIC, FSA and CIFG, and to attract new capital into the market with the licensing of Berkshire Hathaway Assurance Corporation and Municipal and Infrastructure Assurance Corporation.
In addition, the Department has issued an industry advisory, known as a Circular Letter, to bond insurers and has proposed state legislative action. The September 2008 advisory called on insurers to institute a series of “best practices,” including expanded reporting requirements and written underwriting policies. The Department also has urged the Legislature to approve increased minimum capital and reserve requirements, as well as a number of other reform measures.
The Syncora restructuring was reviewed and evaluated by Gene Benger, Michael Campanelli, Jim Davis, Ken Gingrass, Paul Hannon, Larry Levine, Tim Nauheimer and Margot Small under the direction of Deputy Superintendents Hampton Finer, Michael Moriarty and Robert Easton.