MBIA to acquire rest of reinsurer Channel Re

ARMONK, N.Y.

MBIA Inc. said Wednesday that its bond insurance subsidiary has acquired the remaining 83 percent of Channel Re Holdings Ltd. and Channel Reinsurance Ltd. that it didn't already own for $40 million.

Channel Re was created in 2004 to provide reinsurance -- backup coverage to help insurers manage risk -- solely to MBIA and its affiliates, including the subsidiary MBIA Insurance Corp.

MBIA said that it now plans to end all of its reinsurance agreements with Channel Re and liquidate the company in the third quarter.

MBIA, which is based in Armonk, said the transaction will increase its statutory capital and add to its assets that can easily be converted to cash.

MBIA writes insurance policies that promise to repay bondholders when bond issuers default. The company is seeking to recover from the collapse of the housing bubble, which triggered heavy losses from the insurer's coverage of risky securities linked to the subprime mortgage market.

Its shares rose 10 cents to $8.58 in midday trading Wednesday.