Berkshire Hathaway (BRK.A - Get Report) is establishing a bond insurance firm with the goal of giving local governments a cheaper borrowing option, a move that will likely mean stiff competition for existing players such as Ambac (ABK) and MBIA (MBI - Get Report), a report said.
The Wall Street Journal said Friday that Berkshire Hathaway Assurance Corp. will begin operating today in New York. The business will guarantee bonds that cities, counties and states use to finance various infrastructure projects, the report said.
Berkshire, run by Nebraska billionaire Warren Buffett, is making the move at a time when big bond insurers are at risk of seeing their credit ratings downgraded amid the turmoil in the financial markets.
The report also said Berkshire will aim to start operating in California, Texas, Illinois, Florida and Puerto Rico.Shares of Ambac and MBIA were losing more than 2% in premarket trading.