To eliminate impairment of FGIC’s surplus to policyholders
Financial Guaranty Insurance Company (FGIC) has announced that the New York Insurance Department (the NYID) has issued an order pursuant to section 1310 of the New York Insurance Law (the NYID Order) requiring FGIC to suspend paying any and all claims and to take the other actions required under the NYID Order, effective November 24, 2009. Accordingly, FGIC will immediately suspend all claims payments.
On November 20, 2009, FGIC filed with the NYID its quarterly statement for the period ending September 30, 2009, in which FGIC reported a surplus to policyholders deficit at September 30, 2009 of $865,834,577 and an impairment of its required minimum surplus to policyholders of $932,234,577. The Superintendent of Insurance (the Superintendent) has directed FGIC to submit a plan to eliminate such impairment of FGIC’s surplus to policyholders.
FGIC is currently formulating a restructuring plan contemplating FGIC’s commencement of a tender offer for the acquisition or exchange of certain residential mortgage backed securities (RMBS) guaranteed by FGIC in the primary market, FGIC’s continued pursuit of commutations with the holders of FGIC-insured collateralised debt obligations of asset-backed securities (ABS CDOs) and the commutation, termination or restructuring of FGIC’s exposure in respect of certain other obligations for which it has established statutory loss reserves all with a view to remediate its RMBS, ABS CDO and other exposures, remove its capital impairment and return it to compliance with the applicable minimum surplus to policyholders requirement (the Surplus Restoration Plan).
The NYID Order requires FGIC to provide the Superintendent a detailed and final plan of the proposed Surplus Restoration Plan (the Final Plan) no later than January 5, 2010. In the event that FGIC fails to provide the Superintendent with the Final Plan by such date, the NYID Order provides that the Superintendent shall seek an order of rehabilitation or liquidation of FGIC forthwith.
The NYID Order further requires FGIC to take such steps as may be necessary to remove the impairment of its capital and to return to compliance with its minimum surplus to policyholders’ requirement by not later than March 25, 2010, or such subsequent date as the Superintendent deems appropriate, without limiting in any way the Superintendent’s ability to seek rehabilitation or liquidation of FGIC prior to such date.