Mark H.S. Cohen of Fitch Investors Service Inc. won the first team All-American Municipal Analyst title in the bond insurance and letter of credit category.

He topped two-time All-American Analyst William deSante of Moody's Investors Service Inc., who finished second.

Mr. Cohen waged an effective campaign over the past 12 months, issuing a variety of controversial reports and providing Fitch's first rating of a bond insurer: FGIC (Aaa/AAA/AAA).

The advent of the triple triple-A bond insurer, FGIC, highlights Fitch's overall jump in the All-American rankings over the past three years as well as institutional investors' increased acceptance of the Fitch rating.

Mr. Cohen noted, "It's great weather for the bond insurers, but it's the best time to check your umbrella and a good time to check on some of the clouds that may be on the horizon."

Volume on the Upswing

Under the heading of great weather for bond insurance companies, he noted that volume is up. While the default record is no longer unblemished, the industry's analysis is still outstanding.

Also, asset quality in the bond insurers' investment portfolios is good, even though there is some double jeopardy because they have insured issuers and bought uninsured bonds for their portfolios.

"The overseas as well as asset-backed market are beckoning. The annuitant nature of bond insurance company earnings is the envy of Wall Street and stock prices are up," he added.

During 1992, the insurance volume is at a record pace, with about 35% of the market using bond insurance.

"The list of good things happening to the bond insurers, like the Energizer bunny, keeps going on and going on and going on," Mr. Cohen said.

Don't Be Lulled into Complacency

Despite the fact the industry has a great story to tell, Fitch doesn't believe analysts should be lulled into complacency.

For example, in the reinsurance area, Mr. Cohen has seen the deterioration of multiline reinsurers in the Scandinavia sector. The concentration of risk in Enhance and Capital RE remains a concern of Mr. Cohen, but a new entrant in the monoline and multiline areas would help mitigate those risks.

Municipal analysts across the nation have their antenna up about asset-backed securities, Mr. Cohen said. The message is: Tread carefully' when insuring asset-backed securities." Already, he believes there may be risks in the commercial property sector that some insurers should avoid.

Premium Rates in Holding Pattern

Premium rates continue to be a concern of Mr. Cohen, with rates in a holding pattern for the past four years. He explained that with the large volume in 1992, there is enough premium income to go around. But, if bond insurance volume backs up, then competition would put pressure on premium rates. "These are the bedrock of the industry," Mr. Cohen stressed, that must support the growth of the companies.

Single Issuer Risk

A final potential cloud on the horizon is single-issuer risk. "That's when bond insurers stake large amounts of their capital, up to 75% based on insurance filings, on a single issuer's debt."

In summary, Mr. Cohen stated, "Clearly, there are some potential problems. It's good weather now, but bad weather may arrive. Fitch has staked out the high ground in this analysis because we want to help investors make sure they have the right umbrella if bad weather arrives."

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