Losses on guaranteeing residential mortgage-backed securities created from 2005 to 2007 "will continue to weigh on bond insurers for many years," Standard & Poor's Corp. says.
Insurance written on residential mortgage-backed securities, including subprime home loans, has forced some companies into "hibernation" — taking on no new business and canceling credit-default swaps contracts in return for cash and ownership interests — to stay afloat, S&P said.
"We won't know the full extent of structured finance losses for some time," S&P analyst David Veno in New York wrote in a report published Tuesday.
"But they will affect the capital and financial flexibility of the insurers because many have already exhausted most of their near-term capital-raising opportunities or because the cost of raising capital has become too" high, he wrote.
MBIA Inc. and Ambac Financial Group Inc., the two largest bond insurers, were stripped of their AAA ratings in June after losses on the insuring of collateralized debt obligations and other mortgage-linked securities.