The state Department of Financial Services has licensed a new bond insurer for small- and mid-sized municipal projects that will help cut borrowing costs for small cities, towns and villages in the state, according to Gov. Andrew Cuomo and Financial Services Superintendent Benjamin Lawsky. The company, which will be based in New York City, expects to issue its first policy in September.
Build America Mutual Assurance Co. will be the first mutual-bond insurer serving the United States municipal market. The company received $600 million in initial financing and secured a “AA” rating with a stable outlook from Standard & Poor’s. The rating makes Build America the highest rated bond insurer in the country, according to state officials.
The company will employ roughly40 people to start and anticipates it will have about 100 employees within two years, Cuomo and Lawsky said. It will focus on municipal bonds up to $75 million, insuring investment-grade general obligation bonds or other revenue bonds to fund essential government facilities and services. It will not insure structured securities, a practice that led to serious problems for bond insurers during the financial crisis.
“New York is committed to fostering innovative new businesses. Build America will strengthen the economy and help create jobs not only in New York, but around the nation, by helping small local governments raise the funds they need to build necessary projects, while saving taxpayers’ money,” Cuomo said in a statement.
Build America Mutual Assurance Co. has a “unique business model” that will create dozens of jobs in New York, Lawsky said in a statement. “Further, the company should enable smaller and mid-sized communities to undertake essential capital projects that are good for the economy,” he said.