Security Capital Assurance
may have as much as a $2 billion shortfall, according to the rating agency Fitch Ratings.
Fitch placed the troubled bond insurer on ratings watch negative, threatening to slash the insurance company's triple-A rating. Tom Abruzzo, an analyst at Fitch, said SCA would be given four to six weeks to shore up its balance sheet.
Monoline insurance companies, which insure debt from municipal bonds to structured mortgage paper, have been under fire by ratings agencies and Wall Street investors alike, because trouble in the mortgage market may mean greater defaults in the debt these companies insure.
"We conducted our ratings process to try and bake in what we were seeing over the course of the market," Abruzzo said on a call discussing the ratings watch.
Monoline insurers use their high credit ratings to insure debt. A ratings cut threatens to significantly impinge their ability to do business economically.
In a release following Fitch's announcement, SCA said that it was working on a plan to address its capital shortfall but did not provide details.
"While we are disappointed with Fitch's decision today, we have a plan to address their additional capital requirements," SCA CEO Paul Giordano said in the release. "Our plan involves a range of options for increasing our capital position within the time period indicated by Fitch."
A call to an SCA spokesman was not immediately returned.
Shares of SCA plummeted some 18% to about $5.67.