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The State of the Bond Insurance Industry


The purpose of this hearing is to examine the current state of the Bond Insurance Industry, including past decisions and policies that have led to the present crisis.

Friday--March 14, 2008
10:00 AM
250 Broadway
Assembly Hearing Room
Room 1923, 19th Floor
New York, NY

Bond insurance is purchased to guarantee the payment of principal and interest to holders of municipal bonds. Over the past several years, many bond insurers have extended coverage to insure different financial services products, including products backed by subprime mortgages. The recent decline in the worth of the subprime mortgage market has led credit rating agencies to downgrade or threaten to downgrade the credit ratings of bond insurance companies, which in turn has caused a dangerous drop in consumer confidence. The result of this drop in consumer confidence has already led to stock market volatility, a reduced ability to offer auction rate securities, a reduced ability to finance student loans, a decrease in the value of bank holdings and insurance company reserves, and an increased cost of and reduced availability of bond insurance. The availability and affordability of bond insurance will impact municipalities, which use municipal bonds to finance key projects relating to education, transportation infrastructure, and construction. If municipalities are unable to afford bond insurance, they may be forced to abandon or delay important and necessary projects.

This hearing will examine the need for increased regulatory reform and transparency of the bond insurance industry in order to mitigate the current crisis facing the industry, prevent future crises in the market, and ensure the strength and resiliency of New York's economy, which is tied so closely to the financial markets.

Please see the reverse side for a list of subjects to which witnesses may direct their testimony. Persons wishing to present pertinent testimony to the Committee at the above hearing should complete and return the enclosed reply form as soon as possible. It is important that the reply form be fully completed and returned so that persons may be notified in the event of emergency postponement or cancellation.

Oral testimony will be limited to ten minutes in duration. In preparing the order of witnesses, the Committee will attempt to accommodate individual requests to speak at particular times in view of special circumstances. These requests should be made on the attached reply form or communicated to Committee staff as early as possible.

Ten copies of any prepared testimony should be submitted at the hearing registration desk. The Committee would appreciate advance receipt of prepared statements.

In order to further publicize these hearings, please inform interested parties and organizations of the Committee's interest in hearing testimony from all sources.

In order to meet the needs of those who may have a disability, the Assembly, in accordance with its policy of non-discrimination on the basis of disability, as well as the 1990 Americans with Disabilities Act (ADA), has made its facilities and services available to all individuals with disabilities. For individuals with disabilities, accommodations will be provided, upon reasonable request, to afford such individuals access and admission to Assembly facilities and activities.

Hon. Joseph Morelle
Member of Assembly
Committee on Insurance


  1. What has caused the current crisis in the bond insurance market and what role did the regulator play in contributing to such crisis?

  2. If bond insurer credit-ratings are downgraded, how will the New York market be impacted?

  3. What could be done to mitigate the current crisis and to provide stability to the marketplace?

  4. What will the effect be if bond insurers split their book of business into good and bad risks?

  5. How would the proposed $10 million deficiency appropriation for legal and financial contractual services be used to provide a reliable solution to the current problems facing the bond insurance market?

  6. What statutory or regulatory reforms should be enacted to strengthen the bond insurance industry?

  7. What role, if any, should the rating agencies have played in approving AAA ratings for securities?

  8. What is the short term and long term impact of the crisis on bond auctions?


Persons wishing to present testimony at the public hearing on The State of the Bond Insurance Industry are requested to complete this reply form as soon as possible and mail or fax it to:

Lishone Bowsky
Senior Committee Assistant
Assembly Committee on Insurance
23 Floor - Alfred E. Smith Office Building
80 South Swan Street
Albany, New York 12248
E-mail: Bowskyl@assembly.state.ny.us
Phone: (518) 455-4311
Fax: (518) 455-7095

box I plan to attend the following public hearing on The State of the Bond Insurance Industry to be conducted by the Assembly Committee on Insurance on March 14, 2008.

box I plan to make a public statement at the hearing. My statement will be limited to 10 minutes, and I will answer any questions which may arise. I will provide 10 copies of my prepared statement.


I will address my remarks to the following subjects:

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