Insurance in Force

12 Months Ended

Dec. 31, 2018

Note 13: Insurance in Force

The Company guarantees the payment of principal of, and interest or other amounts owing on, municipal, asset-backed, mortgage-backed and other non-municipal securities including CDS contracts. The Company’s insurance in force represents the aggregate amount of the insured principal of, and interest or other amounts owing on, insured obligations. The Company’s ultimate exposure to credit loss in the event of nonperformance by the issuer of the insured obligation is represented by the insurance in force in the tables that follow.

The financial guarantees issued by the Company provide unconditional and irrevocable guarantees of the payment of the principal of, and interest or other amounts owing on, insured obligations when due. The obligations are generally not subject to acceleration, except in the event the Company has the right, at its discretion, to accelerate insured obligations upon default or otherwise. Payments to be made by the issuer on the bonds or notes may be backed by a pledge of revenues, reserve funds, letters of credit, investment contracts or collateral in the form of mortgages or other assets. The right to such funds or collateral would typically become National’s or MBIA Corp.’s upon the payment of a claim by either National or MBIA Corp.

As of December 31, 2018, insurance in force, which represents principal and interest or other amounts owing on insured obligations, had an expected maturity through 2058. The distribution of MBIA Corp.’s and National’s combined insurance in force by geographic location, excluding financial obligations guaranteed by MBIA Corp. on behalf of affiliated companies, is presented in the following table:

		As of December 31,
$ in billions		2018			2017
				% of			% of
		Insurance		Insurance	Insurance		Insurance
Geographic Location		in Force		in Force	in Force		in Force
California		$	25.9	20.2%	$	30.3	19.6%
Illinois			11.1	8.7%		13.1	8.5%
Puerto Rico			7.9	6.2%		8.2	5.3%
New Jersey			6.8	5.3%		7.6	4.9%
New York			5.9	4.6%		9.3	6.0%
Hawaii			4.3	3.4%		4.5	2.9%
Texas			4.3	3.4%		6.1	3.9%
Virginia			3.7	2.9%		4.2	2.7%
Oregon			3.2	2.5%		3.6	2.3%
Florida			3.1	2.4%		3.8	2.5%
	Subtotal		76.2	59.6%		90.7	58.6%
Nationally Diversified			13.5	10.5%		15.7	10.1%
Other states			29.1	22.7%		37.0	23.9%
	Total United States		118.8	92.8%		143.4	92.6%
Internationally Diversified			0.4	0.3%		0.4	0.3%
Country specific			8.9	6.9%		11.1	7.1%
	Total non-United States		9.3	7.2%		11.5	7.4%
Total		$	128.1	100.0%	$	154.9	100.0%

The insurance in force and insured gross par outstanding by type of bond, excluding financial obligations guaranteed by MBIA Corp. on behalf of affiliated companies, are presented in the following table:

				As of December 31,
$ in billions				2018				2017
				Insurance		Gross Par		Insurance		Gross Par
Bond type				in Force		Amount		in Force		Amount
Global public finance - United States:
	General obligation⁽¹⁾			$	34.2	$	17.3	$	42.8	$	22.9
	General obligation - lease				4.0		3.0		5.1		3.8
	Municipal utilities				14.2		9.5		17.7		11.8
	Tax-backed				24.0		11.2		26.5		12.4
	Transportation				12.0		4.8		15.2		6.9
	Higher education				2.5		1.7		3.2		2.1
	Health care				1.7		1.2		2.6		1.8
	Military housing				15.8		7.2		16.3		7.3
	Investor-owned utilities⁽²⁾				2.0		1.3		3.1		2.0
	Municipal housing				0.3		0.2		0.4		0.3
	Other⁽³⁾				0.9		0.5		1.1		0.6
		Total United States			111.6		57.9		134.0		71.9
Global public finance - non-United States:
	International utilities				1.4		1.2		1.7		1.4
	Sovereign-related and sub-sovereign⁽⁴⁾				3.5		2.5		3.8		2.7
	Transportation				3.0		2.5		4.5		3.6
	Other⁽⁵⁾				0.1		0.1		0.2		0.1
		Total non-United States			8.0		6.3		10.2		7.8
			Total global public finance		119.6		64.2		144.2		79.7

Global structured finance:
	Collateralized debt obligations⁽⁶⁾				0.5		0.4		0.5		0.4
	Mortgage-backed residential				3.4		2.5		4.7		3.6
	Mortgage-backed commercial				0.6		0.3		0.7		0.3
	Consumer asset-backed				0.5		0.4		0.9		0.7
	Corporate asset-backed⁽⁷⁾				3.5		2.0		3.9		2.3
		Total global structured finance			8.5		5.6		10.7		7.3
			Total	$	128.1	$	69.8	$	154.9	$	87.0
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(1) - Includes general obligation unlimited and limited (property) tax bonds, general fund obligation bonds and pension obligation bonds of states, cities, counties, schools and special districts.
(2) - Includes investor owned utilities, industrial development and pollution control revenue bonds.
(3) - Includes certain non-profit enterprises, stadium related financing and student loans.
(4) - Includes regions, departments or their equivalent in each jurisdiction as well as sovereign owned entities that are supported by a sovereign state, region or department.
(5) - Includes municipal owned entities backed by sponsoring local government and tax backed transactions.
(6) - Includes a transaction (represented by structured pools of CRE assets) that does not include typical CDO structuring characteristics, such as tranched credit risk, cash flow
waterfalls, or interest and over-collateralization coverage tests.
(7) - As of December 31, 2018, includes structured insurance securitizations of $2.2 billion and $1.0 billion of insurance in force and gross par amount, respectively. As of December 31, 2017, includes structured insurance securitizations of $2.3 billion and $1.1 billion of insurance in force and gross par amount, respectively.

Affiliated Financial Obligations Insured by MBIA Corp.

Investment agreement contracts and MTNs issued by the Company’s corporate segment and the Facility issued by the Company’s international and structured finance insurance segment are insured by MBIA Corp. and are not included in the previous tables. If MBIA Inc. or these subsidiaries were to have insufficient assets to pay amounts due, MBIA Corp. would be obligated to make such payments under its insurance policies. As of December 31, 2018, the maximum amount of future payments that MBIA Corp. could be required to make under these guarantees is $2.0 billion. These guarantees, which mature through 2037, were entered into on an arm’s length basis. MBIA Corp. has both direct recourse provisions and subrogation rights in these transactions. If MBIA Corp. is required to make a payment under any of these affiliate guarantees, it would have the right to seek reimbursement from such affiliate and to liquidate any collateral to recover amounts paid under the guarantee.

Reinsured Exposure

Reinsurance enables the Company to cede exposure for purposes of syndicating risk. The Company generally retains the right to reassume the business ceded to reinsurers under certain circumstances, including a reinsurer’s rating downgrade below specified thresholds. At this time, the Company does not intend to utilize reinsurance to decrease the insured exposure in its portfolio.

MBIA requires certain unauthorized reinsurers to maintain bank letters of credit or establish trust accounts to cover liabilities ceded to such reinsurers under reinsurance contracts. The Company remains liable on a primary basis for all reinsured risk. MBIA believes that its reinsurers remain capable of meeting their obligations, although, there can be no assurance of such in the future.

The aggregate amount of insurance in force ceded by MBIA to reinsurers was $4.2 billion and $5.1 billion as of December 31, 2018 and 2017, respectively.

As of December 31, 2018, the aggregate amount of insured par outstanding ceded by MBIA to reinsurers under reinsurance agreements was $2.2 billion compared with $2.7 billion as of December 31, 2017. As of December 31, 2018, $1.7 billion of the ceded par outstanding was ceded from the Company’s U.S. public finance insurance segment and $499 million was ceded from the Company’s international and structured finance insurance segment. Under National’s reinsurance agreement with MBIA Corp., if a reinsurer of MBIA Corp. is unable to pay claims ceded by MBIA Corp. on U.S. public finance exposure, National will assume liability for such ceded claim payments. The following table presents information about the Company’s reinsurance agreements as of December 31, 2018 for its U.S. public finance and international and structured finance insurance operations.

In millions

Standard &

Letters of

Poor's Rating

Moody's Rating

Ceded Par

Credit/ Trust

Reinsurance

Reinsurers

(Status)

Outstanding

Accounts

Recoverable⁽¹⁾

Assured Guaranty Re Ltd.

WR⁽²⁾

1,009

(Stable Outlook)

Assured Guaranty Corp.

870

(Stable Outlook)

Overseas Private

AA+

Aaa

244

Investment Corporation

(Stable Outlook)

Others

A+ or above

WR⁽²⁾

Total

2,194

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(1) - Total reinsurance recoverable is primarily related to recoverables on unpaid losses.

(2) - Represents a withdrawal of ratings.