Financial Guaranty Trivia Quiz

Answer: Ambac

It was in 1971 when Ambac first started insuring bonds. At that time it only insured municipal bonds, not corporate bonds, hence the name Ambac which is an acronym for American Municipal Bond Assurance Corporation. Ambac was founded in Milwaukee, Wisconsin as a subsidiary of MGIC Investment Corp.

MBIA is also one of the big players in the game. MBIA stands for Municipal Bond Insurance Association. They were founded in 1971 but did not start to insure bonds until 1973.

FGIC stands for Financial Guaranty Insurance Corporation and started business in 1983. They were owned by GE from 1989 until 2004 when they were sold to a group of investors led by PMI Group. FSA stands for Financial Security Assurance. FSA started business in 1985 and, in 2000, were acquired by Dexia.

Answer: Armonk

In 1989 MBIA moves from White Plains to a 97,000 square-foot building on a 15-acre meadow near the Kensico Reservoir in Armonk, New York.

Answer: MGIC

In February of 2007 MGIC and Radian agreed to merge companies. The main reason according to MGIC was the large write off in C-Bass. Radian and MGIC each owned roughly 1/2 of C-Bass. C-Bass ended up going out of business at the end of 2007 during the mortgage crisis. C-Bass generally bought distressed mortgages then securitized the loans and subsequently sold out the bonds to investors.

The value of the deals greatly reduced forcing C-Bass to be under capitalized and subsequently go out of business.

Answer: France

CIFG is a AAA rated bond insurer although not as large as the big 4 (MBIA, Ambac, FSA & FGIC) they still do plenty of business in the United Stated and overseas.

In 2001 CIFG was formed by the merger of 2 companies: (1) Banque Populaire in Angers, France & (2) Groupe Caisse d'Epargne, the French cooperative savings bank network.

In 2006 Groupe Banque Populaire and Groupe Caisse d'Epargne combined several of their respective businesses into a new entity, Natixis, one of the leading banking groups in France.

Answer: 2004

On April 23, 2004 the Initial Public Offering of Assured Guaranty Ltd. was priced at $18.00 per share on the New York Stock Exchange ("NYSE").

Answer: Financial Security Assurance

FSA started in 1985 and was the first bond insurer that focused on financial guarantees for asset-backed securities.

Asset backed securities have grown to since the mid 1980s. With the explosion of the mortgage market at the end of the 20th century and rolling into the beginning of the 21st century the need to insure mortgage backed securities ("MBS") & collateralizaed debt obligations ("CDO's) was much needed. With insurance, corporations could issue debt at a lower interest rate therefore saving money to do more business and write more deals.

Answer: FGIC

In 1992 FGIC became the first US financial guarantor to obtain a license to write financial guaranty insurance in the United Kingdom. Due to laws and rules within each country bond insurance may not be a viable option. Certain countries have restrictions on how funds are raised which may prohibit bond insurers from entering.

The countries that do allow bond insurance can greatly benefit by issuing debt at lower costs.

Answer: 1979

In 1979 Ambac received the coveted AAA rating from S&P. MBIA which started insuring bonds in 1973 was rated AAA from the start.

When a municipality or corporation issues debt and pays for bond insurance then the municipality or corporation can issue bonds (a/k/a debt) using the rating of the bond insurer and therefore save money because the bonds would be paying out a lower interest rate.

Answer: Dental insurance

Dental insurance is generally not part of bond insurance. CDS's, GO's and MBS bonds are all very popular types of bonds that bond insurer's guaranty. GO's are bonds backed by the full faith of the city or township issuing the securities. If a city or town has a poor debt rating they are likely to seek bond insurance so they are able to the sell the bonds at a lower rate.

In some cases people may not want to buy the bonds because there is too much risk that they will not be paid.

Answer: Alaska

Ambac who started the bond insurance business in 1971 insured an Alaskan bond in the amount of $650,000 for the Greater Juneau Borough Medical Arts Building. This bond was insured in 1971 and helped create a name for bond insurers because municipalities realized the savings when they used bond insurance because they could issue bonds at a lower interest rate. Bonds were rated using the insurer's credit rating, rather than the debt rating of the issuer (which was lower).