Тред №30510

2 Feb 2008 21:02 GMT Moody's downgrades MBIA reinsurer NEW YORK (AP) - Moody's downgraded the financial strength rating of Channel Reinsurance Ltd., imperiling a pillar of credit safety for bond insurer MBIA Inc. Moody's cut its financial strength rating on Channel Re to "Aa3" from "Aaa." The new rating implies Channel Re's balance sheet is "high-grade," whereas the previous rating implied "maximum safety." Channel Re was created in 2004 to provide "reinsurance" to MBIA, a bond insurer based in Armonk, N.Y. MBIA is Channel's only customer. MBIA writes insurance policies that promise to repay bondholders when bond issuers default. MBIA, which insures $670 billion in debt, buys reinsurance for a little more than $70 billion of the bonds it insures. Reinsurance essentially means buying an insurance policy to protect an insurance policy, or shifting some of the risk and some of the premiums to another insurer. Channel Re reinsures just under half of MBIA's ceded debt, implying the company guarantees more than $35 billion in bonds. Moody's said Channel Re has "significant exposure" to risky mortgage investments. The company was too willing to accept risks from MBIA, Moody's said. Collateralized-debt obligations, or pools of different kinds of debt often layered with risky mortgage loans, constitute 12 percent of Channel's insured debt, Moody's said. Moody's estimates Channel Re needs $1.3 billion in cash available to pay claims to maintain the top-notch rating. The company has access to $930 million, Moody's said. When an insurer is downgraded, much of the debt the company insured is downgraded too because a bulwark protecting the debt from default is less sturdy. A downgrade of one of MBIA's reinsurers could leave MBIA itself more vulnerable to a downgrade. Channel Re is owned by MBIA, RenaissanceRe Holdings Ltd., PartnerRe Ltd. and Koch Industries Inc. Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed