Municipal Bond Investors Assurance Corp. yesterday announced its new French subsidiary, MBIA Assurance S.A., received triple-A ratings from Moody's Investors Service and Standard & Poor's Corp.

The triple-A ratings should help MBIA Assurance quickly establish itself as a strong presence in the European financial markets. A major factor behind the top-notch ratings is a reinsurance arrangement where the subsidiary will lay off about 90% of its risk to MBIA Corp.

"Right now its essentially an MBIA obligation, an that's what gives us the comfort," said William deSante, vice president and managing director at Moody's. He added that a "net worth maintenance agreement" obliges MBIA Corp. to keep 30 million French francs, or about $5.44 million, on the subsidiary's balance sheets.

MBIA is pinning big hopes on Paris-based MBIA Assurance, betting that its central location will serve as an appropriate springboard for insuring local government credits throughout Europe. "With our French subsidiary, MBIA is positioned to capitalize on the evolution of a more global market for public finance," said William O. Bailey, chairman and chief executive officer of MBIA.

The public finance market in France, where MBIA is likely to test the waters, is very young and certainly unproven territory. The federal system of financing public projects was first loosened in 1982, and since then some municipalities have borrowed with abandon.

Last year, the western French town of Angouleme defaulted on almost $200 million of debt, according to the Economist. When the banks that purchased the bonds went to the federal government in a test of the implied federal backing, they reportedly were turned down.

The youth of the French market makes MBIA's direct support of MBIA Assurance all the more important. "Lingering out there is this question of how the European public finance markets will develop," Mr. deSante said. "We will have to continue to monitor the regulations in France, and watch the markets as it evolves."

A spokesman for MBIA said the new subsidiary will do its first European deal "shortly." In the past, company officials have said the probable issues to qualify for MBIA's guarantee are fee-based revenue deal such as toll roads.

MBIA also announced yesterday that Michael J. Maguire, formerly a vice president of underwriting at the firm, will take the helm as managing director of the new company.

Mr. Maguire has more than 13 years of public finance experience. In late 1989, he joined MBIA from Bond Investors Guaranty Co., the municipal insurer that was purchased by MBIA that year. With BIG, Mr. Maguire was vice president and director of underwriting municipal utility and transportation issues. Prior to 1985, Mr. Maguire was a ratings officer with Standard & Poor's Corp.

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