Bond Insurers May Face Breakup

New York Insurance Superintendent Eric Dinallo is considering a split-up of monoline bond insurers as one possible strategy to protect policyholders and insure the critical triple-A ratings of guarantors Ambac Financial(ABK Quote), MBIA(MBI Quote) and Financial Guaranty Insurance Co., according to testimony to be delivered on Capitol Hill Thursday afternoon.

Dinallo, who has been engaged in a frenzied pitch to save the financial guarantor market, suggested separating municipal bond policies "and any other healthy parts of the business" from "the structured finance and problem parts of the business," according to testimony obtained by TheStreet.com that Dinallo is expected to present to a subcommittee of the House Committee on Financial Services.

Dinallo emphasizes that his main priority is to protect the millions of state, city and other government policyholders that have obtained insurance on municipal securities. ...