(Reuters) - New York state's financial regulator said on Monday that it had licensed the first-ever mutual municipal bond insurer, which expects to start underwriting small deals later this year.
Build America Mutual Assurance Co, or BAM, will focus on investment-grade muni bond issues of up to $75 million when it starts writing coverage in September, the New York Department of Financial Services said in a statement.
As a mutual, BAM will be owned by the issuers. The state said the company was capitalized with $600 million in initial financing and had the highest credit rating of any bond insurer in the country.
The new insurer is backed by two veterans of the industry. Hudson-Greenwich Partners LLC said in November that it intended to launch BAM, although the firm's website currently has no details other than a picture of a road under construction.
Hudson-Greenwich partners Robert Cochran and Sean McCarthy were previously chief executive officer and chief operating officer, respectively, of bond insurer FSA, which was acquired by peer Assured Guaranty in 2009.
Their new venture will compete with Assured Guaranty, which is effectively the only bond insurer still writing new business in the United States.
The once-robust business was all but crippled by the financial crisis, as bond insurers that strayed from their municipal routes into structured finance were slammed by losses.
While insured bonds accounted for more than half of the market in 2005, just 4 percent of muni issues were insured in the first half of 2012.
(Reporting by Ben Berkowitz in Boston; Additional reporting by Joan Gralla in New York and Karen Pierog in Chicago; Editing by Lisa Von Ahn)