And so the sad saga of the bond insurers continues, as this report from Bloomberg demonstrates:
Financial Guaranty Insurance Co. was sued by the Los Angeles County Museum of Art, which said insurance it bought on $200 million of municipal bonds became “worthless” when Fitch downgraded FGIC’s debt rating.
The museum wants to recover about $6.75 million in premiums it paid FGIC and as much as $32 million in foreseeable damages “arising out of FGIC’s failure to maintain its Triple A rating as promised,” it said in a complaint filed today in federal court in Los Angeles.
Quite simply, bond insurers are in the business of selling promises. A broken promise is a broken business model.