On January 22, 2009, the New York Insurance Department (the “NYID”) approved two transactions involving CIFG Holding, Ltd. (“CIFG”), a financially-impaired bond insurer.  The transactions involved a commutation of approximately $12 billion in troubled credit default swaps and reinsurance of $13 billion of municipal bonds, and are expected to help the company avoid rehabilitation.  Last year, the NYID agreed to forbear placing CIFG in rehabilitation in order to allow these transactions to develop.

The NYID whose office worked closely with CIFG, Assured Guaranty Corp. (to whom the bonds are being reinsured and novated), CIFG’s counterparties, the Bermuda Monetary Authority and the Autorité de Contrôle des Assurances et des Mutuelles (France’s insurance regulatory authority) to coordinate and close these transactions.  Superintendent of Insurance Eric Dinallo noted the importance of these transactions:

“Adding stability to the bond insurance industry in the midst of the current credit crisis is good for Wall Street, which is so important to New York’s economic health, and also for cities and towns throughout New York and the nation that rely on bond insurance to reduce the cost of borrowing to meet their infrastructure needs. That’s why New York, which is the primary regulator for most of the bond insurers, has been working so hard on this project”

For more coverage of the subprime crisis and how it’s affecting bond insurance companies, see our coverage here.