MBIA looks to past head as monolines flounder

MBIA, the Armonk, New York-based monoline insurer, has appointed Jay Brown as chairman and chief executive officer, nine months after he retired from his last position at the company.

Brown had been chairman and chief executive from January 1999 to May 2004, before handing over the reins to Gary Dunton, who has resigned.

The last three months have been stressful for the monoline companies, which are struggling to shore up their AAA ratings in the face of the market value carnage wreaked by the US subprime crisis.

In a 'letter to owners' written by Brown on his appointment, the monoline announced that it had undertaken a $2.6 billion capital-raising plan over the 60 days leading up to February 19.

“The industry now faces extreme challenges in its ability to raise capital at attractive rates and in sufficient quantity, to maintain a AAA rating on the existing portfolio and sustain an adequate capital base to permit the writing of new policies in a stress environment,” said Brown in the letter.

MBIA’s main competitor, Ambac Finanial Group, also underwent a senior management reshuffle on February 15. The company restructured its risk division, and created the new role of chief risk officer for David Wallis.

Wallis had been in charge of portfolio risk management at the firm, and will now oversee credit risk management and capital and risk analysis.

The capital and risk analysis team will be headed by Bob Selvaggio, and Cathy Matanle will take Wallis’ previous role as head of portfolio risk management.

Other players in the market have also had a turbulent time recently. On February 14, Moody’s downgraded FGIC’s Aaa rating to A3, leading the insurer to request permission from the New York State Insurance Department to split its structured credit and municipal bond portfolios.

At the same time, ACA Capital, the first monoline to be downgraded in the wake of the credit crisis, entered into its third forebearance agreement with its credit counterparties, staving off default until April 23.

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