• Buffet-owned company formed to back municipal bonds
• ‘California was starting to experience a capacity issue for bond insurers’
"I am pleased my department was able to expedite this application," says Department of Insurance Commissioner Steve Poizner. "California was starting to experience a capacity issue for bond insurers, so BHAC is a very welcome entrant to our marketplace."
Generally, the California Department of Insurance attempts to expedite the licensing process when there is either an innovative product or a lack of product availability in California, the department says.
Nationwide, other bond insurers' AAA credit ratings appear to be exposed to potentially big losses from investments like collateralized debt obligations, it says.
While BHAC does not have its own AAA rating, its guarantees are backed by Berkshire-owned National Indemnity Company, which does have its own AAA credit rating.
State statute lets CDI have six months to review applications for licensure from new insurers requesting authority to do business in California. CDI received BHAC's application on Feb. 14 and reviewed and approved it in less than 30 business days.
BHAC is a member of the Berkshire Hathaway group of insurance companies and was formed for the sole purpose of pursuing opportunities in the financial guaranty lines of insurance and reinsurance. It has capital stock in the amount of $15 million and $85 million in surplus, and the corporation's shareholders are committed to contribute another $900 million to the company in the first quarter of 2008. BHAC's ultimate controlling parent is Berkshire Hathaway Inc., a publicly traded Delaware corporation.
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