MBIA INC 8-K (Events or Changes Between Quarterly Reports) 2009-02-20

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 20, 2009 (February 17, 2009)
MBIA INC.
(Exact name of registrant as specified in its charter)
Connecticut 1-9583 06-1185706

(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
113 King Street,

Armonk, New York 10504
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:

914-273-4545
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01 REGULATION FD DISCLOSURE.
MBIA Inc. (the “Company”) issued a press release and a Letter to Owners on February 18, 2009. A copy of the press release is attached as
Exhibit 99.1 hereto and a copy of the Letter to Owners is attached as Exhibit 99.2 hereto.
The information in the press release and Letter to Owners is being furnished, not filed, pursuant to Item 7.01 of Form 8-K. Accordingly, the
information in Item 7.01 of this Current Report, including Exhibits 99.1 and 99.2, will not be incorporated by reference into any registration
statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by
reference.
Item 8.01 OTHER EVENTS.
The Transformation
On February 17, 2009, the Company established a new U.S. public finance financial guarantee insurance company by restructuring (the
“Transformation”) its principal insurance subsidiary, MBIA Insurance Corporation (“MBIA Corp.”). As part of the Transformation, the stock
of MBIA Insurance Corp. of Illinois (“MBIA Illinois”), a financial guarantee insurance company that was acquired by the Company in 1989
and was a direct subsidiary of MBIA Corp., was transferred by MBIA Corp. to the Company, then contributed by the Company to a newly
established intermediate holding company which is itself a subsidiary of the Company. MBIA Illinois is expected to be renamed National
Public Finance Guarantee Corporation.
As part of the Transformation, on February 17, 2009, MBIA Corp. and MBIA Illinois entered into a Quota Share Reinsurance Agreement
effective January 1, 2009 (the “MBIA Corp. Reinsurance Agreement”) pursuant to which MBIA Corp. ceded all of its U.S. public finance
business to MBIA Illinois, including by assigning to MBIA Illinois pursuant to a separate assignment agreement its rights and obligations
with respect to the U.S. public finance business of Financial Guaranty Insurance Company (“FGIC”) that was reinsured by MBIA pursuant to
a reinsurance agreement with FGIC (the “FGIC Reinsurance Agreement”). The MBIA Corp. Reinsurance Agreement is filed as Exhibit 99.3 to
this Form 8-K and any description of it in this Form 8-K is qualified in its entirety by the agreement. The portfolio transferred to MBIA Illinois
by reinsurance or through the assignment of the FGIC Reinsurance Agreement consists entirely of U.S. public finance business with total net
par outstanding of approximately $537 billion (as of September 30, 2008). The reinsurance and assignment transactions between MBIA Corp.
and MBIA Illinois, which became effective as of January 1, 2009, enable covered policyholders and certain ceding insurers to make claims for
payment directly against MBIA Illinois in accordance with the terms of the cut-through provisions of the MBIA Corp. Reinsurance Agreement
and the FGIC Reinsurance Agreement. Under the terms of the cut-through provision in each of those agreements, the covered policyholders
and ceding insurers are granted a third party beneficiary right under the agreement with respect to the applicable cut-through provision only.
The reinsurance and assignment agreements between MBIA Corp. and MBIA Illinois (including the right to make claims for payment directly
against MBIA Illinois described in the previous paragraph) can be terminated upon the mutual agreement of MBIA Corp. and MBIA Illinois,
which termination is subject to the receipt of insurance regulatory approvals. In addition, the MBIA Reinsurance Agreement may not be
terminated if, after giving effect to the termination, the ratings assigned to the underlying securities or bonds would be downgraded or
withdrawn. MBIA Illinois may also assign the MBIA Reinsurance Agreement under certain circumstances to a reinsurer rated at least as
highly as MBIA Illinois, which assignment is subject to the receipt of insurance regulatory approvals. In connection with the Transformation,
MBIA Corp. commuted an existing reinsurance agreement with MBIA Illinois pursuant to which MBIA Corp. reinsures 100% of all of the
policies of MBIA Illinois. The commutation is effective as of January 1, 2009. No penalties were incurred in connection with the commutation.
To provide additional protection for its municipal bond policyholders, MBIA Illinois has also issued a second-to-pay policy for the benefit of
the policyholders covered by the FGIC Reinsurance Agreement (the “FGIC Second-to-Pay Policy”) and a second-to-pay policy for the benefit
of the policyholders and ceding insurers covered by the MBIA Corp. Reinsurance Agreement (the “MBIA Corp. Second-to-Pay Policy”). The
second-to-pay policies, which are a direct obligation of MBIA Illinois, will be held by The Bank of New York Mellon as insurance trustee.
These policies provide that if MBIA Corp. or FGIC, as applicable, does not pay valid claims to these policyholders and ceding insurers under
the relevant underlying policies or assumed reinsurance agreements, as applicable, these policyholders and ceding insurers will then be able to
make a claim for payment directly against MBIA Illinois under the applicable second-to-pay policy.
The MBIA Corp. Second-to-Pay Policy (including the right to make claims for payment directly against MBIA Illinois) will be deemed
cancelled immediately and automatically, without any further action on the part of MBIA Illinois, in the event that the MBIA Corp.
Reinsurance Agreement is terminated. In addition, coverage under the MBIA Corp. Second-to-Pay Policy shall be deemed cancelled in the
event that the MBIA Corp. Reinsurance Agreement is assigned in accordance with its terms and, after giving effect to such assignment, the
ratings on the underlying securities will not be downgraded or withdrawn. The FGIC Second-to-Pay Policy (including the right to make claims
for payment directly against MBIA Illinois) will be deemed cancelled immediately and automatically, without any further action on the part of
MBIA Illinois, in the event that the assignment agreement or the underlying FGIC Reinsurance Agreement is terminated. In addition, coverage
under the FGIC Second-to-Pay Policy shall be deemed cancelled in the event that MBIA Illinois' obligations under the assignment agreement
are assigned and, after giving effect to such assignment, the ratings on the underlying securities will not be downgraded or withdrawn.
In connection with the reinsurance and assignment transactions, MBIA Corp. paid to MBIA Illinois approximately $2.89 billion (which is equal
to the net unearned premium, loss and loss adjustment expense reserves, net of the ceding commission) as a premium to reinsure the policies
covered by the reinsurance and assignment agreements. MBIA Corp. received a 22 percent ceding commission on the unearned premium
reserve. In addition to the $2.89 billion, MBIA Illinois has been further capitalized with $2.09 billion from funds distributed by MBIA Corp. to
the Company, as a dividend and return of capital, which MBIA Inc. in turn contributed through an intermediate holding company to MBIA
Illinois. In addition to a transfer of public finance and other staff to MBIA Illinois from MBIA Corp., MBIA Illinois has entered into services
agreements with MBIA Corp. to provide to each other certain administrative and other support services.
MBIA Corp. and MBIA Illinois received the required regulatory approvals from New York and Illinois prior to executing this restructuring.
MBIA Corp. will continue to insure its remaining book of structured finance and international business, as well as the Guaranteed Investment
Contracts and Medium Term Notes managed by MBIA Asset Management. MBIA Inc.’s other operations consist of the existing global
structured finance, non-U.S. public finance and asset management businesses.
Liquidity Facility
On February 17, 2009, the Company terminated a program of simultaneous repurchase and reverse repurchase transactions with MBIA
Corp. Approximately $1.5 billion in aggregate purchase price of assets of the Company were transferred from the terminated program to a new
program of simultaneous repurchase and reverse repurchase transactions of up to $2 billion in aggregate purchase price (the “Facility”)
entered into between the Company and MBIA Illinois on February 17, 2009. No penalties were incurred in connection with the termination.
The Facility is substantially the same as the program of simultaneous repurchase and reverse repurchase transactions with MBIA Corp. that
was terminated on the same date. Under the Facility, MBIA Illinois earns a fee for delivering primarily government securities to the Company
in exchange for receiving other fixed-income securities. The Facility is designed to enhance the liquidity of the Company.
Ratings Agency Announcements
Moody’s
On February 18, 2009, following the Company’s announcement of the Transformation, Moody’s Investors Service, Inc. (“Moody’s”)
announced its affirmation of the Company's Ba1 senior debt rating and maintenance of its developing outlook, and downgraded the following
ratings of MBIA Corp. and its subsidiaries other than MBIA Illinois, whose Baa1 rating Moody’s placed on review for possible upgrade:
MBIA Corp. -- insurance financial strength to B3, from Baa1; surplus notes to Caa2, from Baa3; and preferred stock to Caa3, from Ba2;
Capital Markets Assurance Corporation -- insurance financial strength to B3, from Baa1;
MBIA UK Insurance Limited -- insurance financial strength to B3, from Baa1;
MBIA México, S.A. de C.V. -- insurance financial strength to B3, from Baa1; and national scale insurance financial strength to B1.mx,
from Aa1.mx;
MBIA Assurance S.A. -- insurance financial strength to B3, from Baa1. According to Moody's, the rating of MBIA Assurance S.A. will
be withdrawn to reflect its absorption by MBIA UK Insurance Limited because all of its assets and liabilities including all of its
outstanding financial guaranty insurance policies, have been transferred to MBIA UK Insurance Limited.
In its press release, Moody’s cited two primary factors for its downgrade of MBIA Corp.: “First is the guarantor's substantial reduction in
claims-paying resources relative to the remaining higher-risk exposures in its insured portfolio, given the removal of capital, and the transfer of
unearned premium reserves associated with the ceding of its municipal portfolio to MBIA Illinois. Second is the continued deterioration of the
firm's insured portfolio of largely structured credits, with stress reaching sectors beyond residential mortgage-related securities.” In addition,
Moody’s stated that MBIA Corp.'s developing outlook “reflects the potential for further deterioration in the insured portfolio” and
“incorporates positive developments that could occur over the near to medium term, including greater visibility about mortgage performance,
the possibility of commutations or terminations of certain ABS CDO exposures, and/or successful remediation efforts on poorly performing
RMBS transactions.” Moody’s also noted that the developing outlook is also based on “the potential for various initiatives being pursued at
the US federal level to mitigate the rising trend of mortgage loan defaults.”
As a result of the ratings action, the Moody's-rated securities that are guaranteed by MBIA Corp. are also downgraded to B3, except those
with higher public underlying ratings. With respect to municipal obligations wrapped by MBIA Corp. that are reinsured by MBIA Illinois,
Moody's stated that “it is in the process of reviewing the Reinsurance Agreement between MBIA Illinois and MBIA Corp and other
documentation to determine whether it is appropriate to assign the insurance financial strength rating of MBIA Illinois to these obligations.
We will issue further guidance on our approach to rating these securities in the near future.”
For all other transactions wrapped by MBIA Corp., Moody's announced that it will withdraw the ratings for which there are no published
underlying ratings in accordance with current rating agency policy. For these transactions, if the rating of MBIA Corp. should subsequently
move back into the investment grade range, or if the agency should subsequently publish the underlying rating, Moody's would reinstate the
rating to the wrapped instruments. Because of the large volume of rating changes resulting from today's actions, Moody’s indicated that it
may take some time for Moody's to update impacted ratings in their ratings database.
Moody’s indicated that its review for upgrade of MBIA Illinois' Baa1 insurance financial strength rating “reflects upward rating pressure
following the group's restructuring, stemming from the company's substantial claims-paying resources relative to its insured portfolio of high-
quality municipal exposures. The review also includes the possibility of improved business prospects for MBIA Illinois in light of the
company's municipal-only focus and strong risk-adjusted capital adequacy.” Moody's said that the potential for upward rating movement is
tempered, however, “by the significant challenges facing both MBIA Illinois and the financial guaranty industry in general, and “any upward
rating revision would likely be limited to the single-A range.” During its review, Moody's indicated that it “will evaluate the impact of MBIA's
restructuring on the future business prospects of MBIA Illinois. As part of the review process, Moody's will consider the company's ability to
regain market confidence, as well as the potential for and impact of any legal challenges coming from the counterparties of MBIA Corp.”
In announcing its affirmation of the Company's Ba1 senior debt rating and maintenance of its developing outlook, Moody’s noted that the
actions “reflect the group's evolving risk profile.” Moody’s cited the following factors in the affirmation: “The corporate restructuring may
strengthen MBIA Inc.'s risk profile by sheltering its investment in MBIA Illinois from the risks of MBIA Corp. The creation of a strongly
capitalized and dedicated municipal insurer also increases the likelihood of regaining market traction. At the same time, continued deterioration
in the group's structured finance portfolio, as well as uncertainty about the group's ability to firewall losses within MBIA Corp., could hurt
MBIA Inc.'s credit profile.”
S&P
On February 18, 2009, following the Company’s announcement of the Transformation, Standard & Poor's Ratings Services (“S&P”) announced
that it had lowered its counterparty credit, financial strength, and financial enhancement ratings on MBIA Corp. and its subsidiaries Capital
Markets Assurance Corporation, MBIA UK Insurance Limited and MBIA Assurance S.A. to BBB+ from AA with a negative outlook. At the
same time, S&P lowered its counterparty credit and financial strength ratings on MBIA Illinois to AA- from AA and placed them on
CreditWatch with developing implications and lowered its counterparty credit rating on the Company to BB+ from A- with a negative
outlook. In addition, S&P lowered its counterparty credit and financial strength ratings on Municipal Bond Insurance Association (the
“Association”) to AA- from AA and placed the ratings on CreditWatch developing, mirroring the action taken on MBIA Illinois.
S&P noted that the downgrade of MBIA Illinois reflects its view of both “its uncertain business prospects and its capital, which is marginally
below our ‘AA' standard,” and noted that “[f]rom a future business production perspective, we believe that MBIA Illinois’ competitive
position may suffer from legacy MBIA performance. In addition, there is uncertainty regarding investors' acceptance of the restructuring and
ring-fencing plan.”
S&P also noted that it downgraded MBIA Corp. because of its view that “its retained insured portfolio lacks sufficient sector diversity and
with time could become more concentrated.” In addition, S&P cited the following factors in its downgrade decision: “[Its] 2005–2007 vintage
direct RMBS, CDO of ABS, and other structured exposures are subject to continued adverse loss development that could erode capital
adequacy. Supporting the debt-service needs of the holding company might also place pressure on capital adequacy. We believe that there is
a strong incentive for MBIA [Corp.] to maintain an orderly runoff of its book of business so as not to damage the franchise value of the newly
launched public finance only subsidiary. To this end, from a risk-management perspective, management has indicated that it will retain
sufficient experienced staff to support surveillance and remediation efforts.”
S&P also noted that the negative outlook on MBIA Corp. reflects their view that “adverse loss development on the structured finance book
could continue” and that “[a] revision of the outlook to stable will depend on, among other factors, greater certainty of ultimate potential
losses as well as the orderly runoff of the book of business.” S&P indicated that it could raise the rating on MBIA Illinois “if it successfully
raises capital and credibly ring fences its operations from MBIA [Corp.],” but noted that “any rating action based on these factors would most
likely remain within the 'AA' category” and that “[i]f MBIA [Illinois] is not able to raise capital or if legal challenges impair management's
restructuring efforts, we could lower the ratings.”
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
99.1 Press Release issued by MBIA Inc. dated February 18, 2009.
99.2 Letter to Owners from Jay Brown, Chairman and Chief Executive Officer of the Company, dated February 18, 2009.
99.3 Quota Share Reinsurance Agreement between MBIA Insurance Corporation and MBIA Insurance Corp. of Illinois dated February
17, 2009.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This current report of MBIA Inc. includes statements that are not historical or current facts and are “forward-looking statements” made
pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “project,”
“plan,” “expect,” “intend,” “will likely result,” “looking forward” or “will continue,” and similar expressions identify forward-looking
statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical
earnings and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-
looking statements, which speak only to their respective dates. The following are some of the factors that could affect financial performance or
could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements: the
possibility that the Company will experience severe losses due to the continued deterioration in the performance of residential mortgage-
backed securities and collateralized debt obligations; fluctuations in the economic, credit, interest rate or foreign currency environment in the
United States and abroad; level of activity within the national and international credit markets; competitive conditions and pricing levels;
legislative or regulatory developments; technological developments; changes in tax laws; changes in the Company’s credit ratings; the effects
of mergers, acquisitions and divestitures; and uncertainties that have not been identified at this time. The Company undertakes no obligation
to publicly correct or update any forward-looking statement if it later becomes aware that such results are not likely to be achieved. The reader
should, however, consult any further disclosures the Company may make in its future filings of its reports on Form 10-K, Form 10-Q and Form
8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MBIA INC.
By: /s/ Ram D. Wertheim

Ram D. Wertheim
Chief Legal Officer
Date: February 20, 2009

EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K

Dated February 20, 2009
Exhibit 99.1 Press Release issued by MBIA Inc., dated February 18, 2009.
Exhibit 99.2 Letter to Owners from Jay Brown, Chairman and Chief Executive Officer of MBIA Inc., dated February 18, 2009.
Exhibit 99.3 Quota Share Reinsurance Agreement between MBIA Insurance Corporation and MBIA Insurance Corp. of Illinois dated
February 17, 2009.
GRAPHIC
Exhibit 99.1
MBIA Establishes Separate Public Finance Bond Insurance Company and Advances Transformation Strategy
Move Expected to Provide Critical Liquidity to the Municipal Bond Market

ARMONK, N.Y.--(BUSINESS WIRE)--February 18, 2009--MBIA Inc. (NYSE: MBI) today announced that it has established a new U.S. public
finance financial guarantee insurance company within the MBIA Inc. group by restructuring (the “Transformation”) its principal insurance
subsidiary, MBIA Insurance Corporation (“MBIA Corp.”). As part of the Transformation, the stock of MBIA Insurance Corp. of Illinois, a
public finance financial guarantee insurance company, was transferred by MBIA Corp. to a newly established intermediate holding company,
which is itself a subsidiary of MBIA Inc. This operating structure will facilitate both transparency and future capital raising efforts. MBIA
Insurance Corp. of Illinois is expected to be renamed National Public Finance Guarantee Corporation (“MBIA Illinois” or “National”).
"Today’s announcement is the first major step toward transforming our business for the future as I outlined when I returned to MBIA last
February,” said Jay Brown, MBIA CEO. "With this company, we have a new, well-capitalized financial guarantee insurer dedicated exclusively
to the U.S. public finance market. As we previously stated, we intend to operate our municipal business as a separate operating and legal
entity that will have no exposure to structured finance business. This split formalizes that commitment. We believe this new business model
will not only preserve the interests of both our public finance and structured finance policyholders and enhance value for our shareholders,
but will benefit the U.S. public finance markets as well.
“Our new enterprise is intended to enhance the ability of states and municipalities to invest in critical infrastructure, facilitating the creation of
new jobs while reducing the burden on taxpayers,” Mr. Brown continued. “As new insured municipal bonds are issued, I expect the public
finance markets will begin to thaw, freeing up much needed capital for future projects. Ultimately we intend to be back in the structured finance
and international markets, but we will maintain strong operational and legal separation between those businesses and the U.S. public finance
business.
“We are grateful for the extraordinary efforts of the New York and Illinois Insurance Departments, whose guidance and support have helped
us reach this important step in our Transformation,” said Mr. Brown.
National, as MBIA Illinois, was acquired in 1989 and was formerly a direct subsidiary of MBIA Corp. MBIA Illinois intends to apply for
approval to redomesticate from Illinois to New York, as well as to change its name.
As part of the restructuring, MBIA Corp. has ceded to National all of MBIA Corp.’s U.S. public finance business, including assigning its
rights and obligations with respect to the U.S. public finance business of Financial Guaranty Insurance Company (“FGIC”) that was reinsured
by MBIA Corp. The portfolio transferred to National by reinsurance or through the assignment of the FGIC portfolio consists entirely of U.S.
public finance business with total net par outstanding of approximately $537 billion (as of September 30, 2008). The reinsurance and
assignment, which became effective as of January 1, 2009, enable covered policyholders to make claims for payment directly against National
in accordance with the terms of the cut-through provisions of the applicable agreements.
To provide additional protection for its municipal bond policyholders, MBIA Illinois has also issued second-to-pay policies for the benefit of
the policyholders covered by the reinsurance and assignment. The second-to-pay policies, which are a direct obligation of MBIA Illinois, will
be held by The Bank of New York Mellon as insurance trustee. These policies provide that if MBIA Corp. or FGIC, as applicable, do not pay
valid claims of their policyholders, the policyholders will then be able to make a claim directly against National under the second-to-pay
policies. MBIA Corp. will continue to insure its remaining book of structured finance and international business, as well as the Guaranteed
Investment Contracts and Medium Term Notes managed by MBIA Asset Management. MBIA Corp. plans to resume business in the
international public finance and global structured finance markets when its ratings and market conditions permit. As a result of the
Transformation, National is one of the only substantial financial guarantee insurers in the U.S. dedicated solely to the U.S. public finance
business.
In connection with the reinsurance and assignment transactions, MBIA Corp. paid to National approximately $2.89 billion (which is equal to
the net unearned premium, loss and loss adjustment expense reserves, net of the ceding commission) as a premium to reinsure the policies
covered by the reinsurance and assignment agreements. MBIA Corp. received a 22 percent ceding commission on the unearned premium
reserve. In addition to the $2.89 billion, National has been further capitalized with $2.09 billion from funds distributed by MBIA Corp. to MBIA
Inc. as a dividend and return of capital, which MBIA Inc. in turn contributed through an intermediate holding company to National. The rating
agencies have not yet announced ratings for National. However, regardless of the outcome of the rating agencies’ analysis in the short term,
National is expected to be capitalized to achieve high stable ratings in order to provide market access and lower-cost funds to public issuers
over the long term.
The Board of Directors of National will maintain strong oversight of the portfolio and credit process. National’s surveillance and risk
management functions, including all business development and transaction underwriting, are fully independent of MBIA Corp. and will reside
entirely within National. Consistent with the Company’s policy decision last February, National will not use credit derivatives to guarantee
new insurance transactions.
In addition to a transfer of public finance and other staff to National from MBIA Corp., National has entered into services agreements with
MBIA Corp. to provide to each other certain administrative and other support services. National’s entire portfolio will be posted on
www.MBIA.com until its new website is launched, and it will be updated monthly to provide maximum transparency and investor analysis at a
detailed level.
-2-
MBIA Inc.’s other operations consist of the existing global structured finance, non-U.S. public finance and asset management businesses.
MBIA Inc. believes that each of the legal entities in the group that conduct this business remain adequately capitalized with claims-paying
resources and liquidity that will permit these entities to continue to meet all of their expected obligations as and when they become due.
MBIA Corp. and National received the required regulatory approvals from New York and Illinois prior to executing this restructuring.
Pro Form a S tatu tory

Finan cial MBIA
Inform ation as of
S e pte m be r 30 2008 C on solidate d C orp. National
$ in billions
Invested Assets 13.0 7.2 5.8
Surplus 3.3 2.5 0.8
T otal Claims Paying
Resources (1) 15.8 10.1 5.7
Insured Net P ar 777 240 537
(1) Does not include $450 million soft capital facility covering net insured losses on U.S. public finance policies which remains with MBIA
Corp. The pro forma numbers set forth in the table are as of September 30, 2008 and do not reflect any fourth quarter activity, which will be
reflected in the fourth quarter operating supplement to be posted on the MBIA website on March 2, 2009 concurrent with the release of the
Company’s fourth quarter financial results.
Forward-Looking Statements
This release contains statements about future results that may constitute "forward-looking statements" within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that these statements are not guarantees of future
performance. There are a variety of factors, many of which are beyond MBIA's control, which affect the operations, performance, business
strategy and results and could cause its actual results to differ materially from the expectations and objectives expressed in any forward-
looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the
date they are made. MBIA does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise
after the date the forward-looking statements are made. The reader should, however, consult any further disclosures MBIA may make in its
future filings of its reports on Form 10-K, Form 10-Q and Form 8-K.
MBIA Inc., headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, fixed-income
asset management, and other specialized financial services. The Company services its clients around the globe, with offices in New York,
Denver, San Francisco, Paris, London, Madrid, Mexico City, Sydney and Tokyo. Please visit MBIA's Web site at www.mbia.com.
CONTACT:
MBIA
Media:
Kevin Brown, +1-914-765-3648
or
Elizabeth James, +1-914-765-3889
or
Investor Relations:
Greg Diamond, +1-914-765-3190
-3-
GRAPHIC
Exhibit 99.2
MBIA Issues Letter to Owners

ARMONK, N.Y.--(BUSINESS WIRE)--February 18, 2009--MBIA Inc. (NYSE:MBI):
February 18, 2009
Dear Owners:
When I first wrote to you upon my return to MBIA in February of last year and outlined my goals for transforming the company, I anticipated
that we would have to move fast to deal with both our own challenges and those we faced in light of the credit crisis that began in late summer
of 2007. As quickly as we moved to preserve our Triple-A rating through the first half of 2008, it was not fast enough. The rating agency
downgrades in June eliminated our option to transform our company from a position of strength and we had to first take all necessary actions
to address the potential effects of these, and probable further, downgrades. Since I last wrote to you in June we have simultaneously dealt
with these effects and with the evolving external environment and we have continued working with our insurance regulators and the rating
agencies to choose an optimal path to reposition the company.
Before I address today’s announcement about the status of our transformation and the formation of a new public finance insurance company,
I would like to reflect on what has changed in the world around us and what has happened at MBIA in the last eight months. Following the
takeover of Bear Stearns by J.P. Morgan, there was a false sense by many in the markets that the worst of the credit crisis was behind us. How
wrong we all were! Since then, we have witnessed a nightmarish collapse of many of the leading global financial institutions. The FDIC seizure
of IndyMac and the decision to place Fannie and Freddie into conservatorship led very quickly to the purchase of Merrill Lynch by Bank of
America, the bankruptcy of Lehman, the government takeover of AIG, the Reserve Primary Fund “breaking the buck,” the conversion of
Morgan Stanley and Goldman Sachs into commercial banks, the purchase of Washington Mutual by J.P. Morgan and the takeover of
Wachovia by Wells Fargo. Almost immediately, liquidity virtually froze. In response, the Federal Reserve, Treasury and Congress developed a
multitude of approaches and facilities to get liquidity back into the financial system here in the United States while other governments and
central banks around the world did the same.
Although the initial Troubled Assets Relief Program was utilized in a very different way than originally proposed (and some companies came
back for a second round of capital), and did not benefit us or our industry, we made it through the fall. We are now starting to hear from the
Obama administration and Congress about how they will use TARP II and the stimulus package to address the ongoing credit freeze and what
has evolved into our worst recession since the 1930’s. We agree with the position recently taken by the Securities Industry and Financial
Markets Association that the federal government could play a significant role in providing much needed liquidity to the municipal and student
loan debt markets. Auction rate securities and variable rate demand notes have been under extreme stress due to a lack of liquidity rather than
any material deterioration in credit quality. A federally backstopped liquidity facility would quickly restore order to this important source of
low-cost financing for issuers and facilitate permanent restructurings of this debt.
During the second half of 2008, with economic upheaval in the world around us, we were busy managing MBIA through our own challenges
and simultaneously preparing for our future. We released our third quarter financial results which included significantly higher loss
expectations for our second lien RMBS portfolio to reflect the worsening external environment and the effects of repositioning of our Asset
Liability Management asset portfolio. We repositioned this portfolio to maintain adequate liquidity as we de-leveraged our ALM business,
which was triggered by the rating agencies’ downgrades. We also initiated lawsuits and claims against the three major institutions that we
believe did not meet their contractual underwriting commitments which led to our multi-billion dollar losses on second liens. We successfully
negotiated the reinsurance assumption of the majority of FGIC’s high quality U.S. public finance portfolio – significantly adding to future
shareholder value – and we also began the process of unwinding our existing third-party reinsurance arrangements. Given the trading levels of
various MBIA debt instruments and our common shares, we deployed a modest amount of free cash to buy our shares and debt at
advantageous prices to add to book value per share.
Rumors of Our Demise Have Been Greatly Exaggerated
In no way has our strategy been a run-off scenario as all of these actions were intended to secure our future and to position us to begin
writing business again in the future. While some market participants have chosen to focus on our recent downgrades and have suggested that
our prospects were nonexistent, that could not be further from the truth. Our embedded adjusted book value is still over $40 per share. The
FGIC transaction and our recent debt and share buybacks are just two of the examples of the numerous value enhancing opportunities
available to us in the market. In addition, today’s transformation, which I will discuss in detail, positions us extremely well to write new
municipal finance business in support of American municipalities and our economy. Finally, the fact is that we have paid out over $2 billion in
claims over the last two years to those investors who bought our insured bonds – a benefit that has not been experienced by those who
purchased uninsured bonds! We continue to position MBIA to pay all expected claims in the future, even under severe global economic
conditions like we are currently experiencing.
When I rejoined MBIA a year ago, one of the first public statements I made was that I believed that the bond insurance model needed to
change. Within a week of that announcement, we published our Principles for MBIA’s Transformation. Even at that time, as we were fighting
hard to retain our Triple-A ratings, it was clear to us that the business model that had served us for the first 34 years of our history had
become outdated.
2
When we published our Principles for Transformation, we indicated our plan to form separate public, structured and asset management
companies within five years. It was our hope to retain our Triple-A ratings and reorganize our business model from a position of strength as
excess capital was generated over that time frame. However, with the downgrades of our credit ratings, we have accelerated the transformation
of your company.
Our New, U.S. Public Finance-Only Financial Guarantee Company
So today’s announcement of our new public finance-only financial guarantee insurance company, which will conduct business only in the
United States, comes after a year-long and highly complex process of transformation. Throughout it all, we have been fortunate to have had
the support and assistance of both the New York State and Illinois Insurance Departments, who understand the value of our product and the
need for a change in the structure of our industry.
We have been working diligently with all of our regulators, the rating agencies and other parties, as well as MBIA constituencies, to bring
about this announcement. The new company is currently doing business as MBIA Insurance Corp. of Illinois (which is where it is domiciled)
but we expect its name to be changed shortly to National Public Finance Guarantee Corporation, or “National.” We also intend to apply to
have the company redomesticated to New York.
Not a Good Bank/Bad Bank Split
With today’s developments, we have now either accomplished or made concrete progress on eight of our 10 principles of transformation. The
first of our transformation principles remains the most important: we remain committed to protecting all of MBIA’s policyholders. This is not a
good bank / bad bank split, although that is how I expect many observers will report on the change. This is a split along structured finance and
U.S. public finance lines that was essential as a first step to transform the company, stabilize the business and help unfreeze the U.S. public
finance capital markets.
Our U.S. public finance policyholders need to know that our municipal business will operate as a separate entity and will not subsidize our
structured business – this split formalizes our commitment. Our structured finance policyholders should also feel very comfortable that their
policies remain in an entity with ample claims-paying resources to meet any expected claims, even under our stress loss scenarios. It is also
important to note that, in the process of securing our transformation, we hired outside advisors while our regulator did its own background
work, and both came to the same conclusion: that we would continue to have the resources to pay all expected claims as they come due.
The U.S. public finance market is still functioning, albeit under significant stress and difficulty, and we are confident that our guarantee can
help improve the liquidity and performance of this market. Today’s move will provide much needed clean capacity for new municipal bond
insurance and alleviate pressure in the secondary markets by providing clarity as to the claims-paying resources supporting MBIA-wrapped
municipal bonds. When conditions have sufficiently improved in the structured finance and international markets, we intend to re-engage our
business activities in those sectors as well. We continue to evaluate opportunities to pursue business and enhance shareholder value through
all of our other insurance companies – MBIA Insurance Corporation, MBIA U.K. and MBIA Mexico – and we will consider forming other
entities where it makes good business sense. However, when we do so, it will be within those separate legal structures and separate from our
U.S. public finance operations.
3
Regardless, for all of our business activities, we will no longer use credit derivatives to guarantee new insurance transactions. Our exposure
to this market injected entirely too much volatility into our financial statements, which had the unfortunate effect of reducing confidence in our
financial strength.
Our fourth transformation principle is one of our next projects – we intend to obtain the highest possible ratings for each of our insurance
subsidiaries. We’ve already been discussing our plans with the rating agencies and we will continue to work with them to achieve the best
possible outcome – an outcome that protects policyholders, allows us to be adequately compensated for our insurance products and
generates attractive returns for our shareholders.
We have more work to do to gain the highest possible ratings for our insurance businesses, and we are also continuing to pursue a level
playing field regarding the tax status of bond insurers competing for insurance opportunities in the United States. We expect to make more
progress on the tax front, as bills have been introduced in the House and Senate and a level playing field is consistent with positions
articulated by the new administration.
An Enduring Value Proposition
We believe that there is still a compelling value proposition for financial guarantee insurance and ongoing demand for guarantees from
insurers with stable ratings in the highest ratings categories. The issue of late has clearly been one of supply with most of the legacy monoline
institutions in various forms of winding down their operations. Financial guarantee insurance has in the past and will continue in the future to
afford issuers with the opportunity to reduce borrowing costs. Our insurance provides investors with an additional level of credit protection,
an unequivocal and demonstrable guarantee for the life of the insured debt issue, and the benefit of our extensive portfolio monitoring and
remediation skills throughout the life of each transaction.
For nearly a year now, we have conducted extensive and multiple surveys with key parties in the municipal bond debt issuance marketplace:
issuers, investors, traders/brokers, investment bankers and regulators. The feedback that we have received from participants in the public
finance market is clear: municipal investors require a company focused exclusively on the U.S. municipal market. We find this encouraging for
both the continued viability of bond insurance and the acceptability of insurance being provided by our new U.S. public finance-only
company. Our decision to reinsure all of our existing U.S. public finance policyholders into the National book demonstrates our objective to
satisfy our existing commitments as we work with the 50,000 plus U.S. issuers on both new issues and restructuring existing debt.
Clearly there will be skepticism and concerns, but we will initiate efforts to educate market participants and, just as we did 34 years ago, embark
on a multifaceted campaign to improve the understanding and confidence in our company’s capabilities and financial strength. With our
decades of experience in this industry, we note with interest the market’s exploration of alternative approaches to municipal credit
enhancement such as a federally funded, government-owned insurer. While we continue to believe that independent, private-sector financial
guarantee insurers provide the market with the most reliable access to capital, we do see possible value in a government-owned reinsurer
(rather than a primary market insurer) for providing important capacity while avoiding potential conflicts of interest and the operational costs
of building world-class risk management, underwriting and surveillance capabilities. We believe that great care would have to be exercised to
structure the enterprise to avoid the difficulties that have plagued some GSEs and other government insurers in the past.
4
About National Public Finance Guarantee Corporation.
With the exit from the market by ACA, SCA, FGIC and CIFG, and the pending sale of FSA to AGO, we expect that National will be one of the
only substantial financial guarantee insurers in the U.S. dedicated solely to U.S. public finance business. Its initial portfolio of $537 billion in
net par outstanding will consist of both the U.S. public finance policies originally insured by MBIA Insurance Corporation and those
reinsured from the FGIC portfolio. All of the existing affected policyholders will have the direct benefit of reinsurance provided by National
through the cut-through provision in the reinsurance agreement and second-to-pay policies, which give MBIA and FGIC policyholders the
ability to make a claim for payment directly against National. The entire portfolio will be posted on www.MBIA.com until the new company’s
website is launched, and all new policies will be added monthly. We are committed to providing maximum transparency to facilitate investor
analysis at the detailed level. As noted above, we felt it was critical to include MBIA’s existing public finance book to facilitate the acceptance
of the new company by municipal bond investors.
We have established National as a subsidiary of a newly formed holding company directly below MBIA Inc. to both allow investors to have
clarity about its operating results and to facilitate future capital raising efforts. We believe that over time this will strengthen your company as
a whole. As I noted last year, I believe this structure would have significantly reduced the cost of the $2.6 billion in capital we raised in early
2008, benefiting both shareholders and policyholders.
Our Goal for Capitalization
It is our intent to capitalize the new company at a level well in excess of the historical capital requirements for Triple-A ratings. This may not be
the case immediately but we plan to raise sufficient new third-party capital (at a deliberate pace) on terms that are beneficial to our existing
shareholders. It is not our intent to dilute existing shareholders and we will explore a variety of options to raising any capital required. Yes, we
have had discussions with the Treasury Department, and we will continue to explore whether this is an avenue that can provide capital to a
healthy financial institution on terms that work for all of our constituencies while supporting the administration’s goal to restore the U.S. credit
markets to a fully functioning basis. Last week’s compensation amendments to the stimulus bill create obvious challenges to attract, retain and
motivate employees for organizations that accept TARP funds, and we will study the provisions carefully to determine if this source of capital
is effective for shareholders.
As we have learned painfully over the past year, we cannot anticipate what level of capital will be required to achieve Triple-A ratings as the
rating agencies have not promulgated a clear, stable and transparent set of capital requirements for a U.S. public finance-only monoline
insurer.
MBIA Insurance Corporation, MBIA U.K. and MBIA Mexico
While we manage our other insurance subsidiaries and our asset management operations to continue to meet all of our expected obligations,
we continue to believe that substantial opportunities will emerge in structured finance and in global credit markets in the months and years
ahead that will create value for our shareholders. We are actively exploring additional steps in our transformation plan to take advantage of
those opportunities as the credit markets stabilize both here in the United States and around the world.
5
The remaining portfolio of business consists of our legacy global structured business and non-U.S. public finance business, the vast majority
of which is performing consistent with original expectations. We will continue our efforts to remediate distressed credits most affected by the
real estate crisis and to work with existing issuers on all other transactions.
We believe, and our regulators concur, that each of these legal entities remains adequately capitalized with claims-paying resources and
liquidity to meet all expected obligations to policyholders.
We will continue to work with both the various regulators and the rating agencies to continue our transformation efforts. While we do expect
continued volatility in loss estimates for another year or so, I expect the steps we have taken and the actions taken by governments around
the world will eventually provide more visibility and stability in our financial results for these operations.
Conclusion
As a fellow shareholder of MBIA, I want you to understand that our Board has fully evaluated and considered the impacts to MBIA’s
shareholders for this undertaking. I am confident that the value proposition for our new public finance-only company will enhance our returns
to our owners. We have not pursued this option lightly and know that the road to long-term success will still have many challenges in the
years ahead.
It goes without saying that all of your employees’ efforts and contributions throughout 2008 and into 2009 have played a key role in getting us
to this stage. I am grateful to have the opportunity to lead the team through this extraordinary period.
We look forward to discussing 2008 results and our new operation with you on March 3rd.
Sincerely,
Jay Brown
Chairman and CEO
MBIA
Forward-Looking Statements: This release contains statements about future results that may constitute "forward-looking statements" within
the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that these statements
are not guarantees of future performance. There are a variety of factors, many of which are beyond MBIA's control, which affect the
operations, performance, business strategy and results and could cause its actual results to differ materially from the expectations and
objectives expressed in any forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking
statements which speak only as of the date they are made. MBIA does not undertake to update forward-looking statements to reflect the
impact of circumstances or events that arise after the date the forward-looking statements are made. The reader should, however, consult any
further disclosures MBIA may make in its future filings of its reports on Form 10-K, Form 10-Q and Form 8-K.
MBIA Inc. (MBI), headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, fixed-
income asset management, and other specialized financial services. The Company services its clients around the globe, with offices in New
York, Denver, San Francisco, Paris, London, Madrid, Mexico City, Sydney and Tokyo. Please visit MBIA's Web site at www.mbia.com.
CONTACT:
MBIA, Media:
Kevin Brown, +1-914-765-3648
Elizabeth James, +1-914-765-3889
or
MBIA, Investor Relations:
Greg Diamond, +1-914-765-3190
Exhibit 99.3
Execution Version
QUOTA SHARE REINSURANCE AGREEMENT

(hereinafter referred to as this “Agreement”)
between
MBIA INSURANCE CORPORATION,
a New York stock insurance corporation
(hereinafter referred to as the “Company”)
and
MBIA INSURANCE CORP. OF ILLINOIS,

an Illinois stock insurance company
(hereinafter referred to as the “Reinsurer”)
T ABLE OF CONT ENT S
ART ICLE I DEFINIT IONS 1
Section 1.01. Defined T erms 1
ART ICLE II BUSINESS COVERED AND ADMINIST RAT ION 4
Section 2.01. Business Covered 4

Section 2.02. Quota Share Reinsurance 4
Section 2.03. Refinancing 4
Section 2.04. Administration 5
Section 2.05. Second-T o-Pay P olicy 5
ART ICLE III EXCLUSIONS 5
Section 3.01. Exclusions 5
ART ICLE IV COMMENCEMENT ; AMENDMENT 6
Section 4.01. Commencement 6

Section 4.02. Amendment 6
ART ICLE V T HIRD-PART Y REINSURANCE AGREEMENT S 6
Section 5.01. P ayment of Reinsurance P remium 6

Section 5.02. Reinsurance Recoveries 6
ART ICLE VI RECOVERIES 6
Section 6.01. Recoveries 6

Section 6.02. Recovery Expenses 6
ART ICLE VII REINSURANCE FOLLOWS ORIGINAL P OLICIES 6
Section 7.01. Follow the Fortunes 6

Section 7.02. Bound by Original Insurance 7
Section 7.03. T hird P arty Rights 7
ART ICLE VIII P REMIUMS AND COMMISSIONS 7
Section 8.01. P remiums and Commissions 7
ART ICLE IX CUT -T HROUGH 9
Section 9.01. Cut-T hrough. 9
ART ICLE X INSOLVENCY OF T HE COMP ANY 10
Section 10.01. Insolvency. 10
ART ICLE XI OFFSET 11
Section 11.01. Offset 11
ART ICLE XII ERRORS AND OMISSIONS 11
Section 12.01. Errors and Omissions 11
ART ICLE XIII CURRENCY 11
Section 13.01. Dollars 11
ART ICLE XIV ARBIT RAT ION 12
Section 14.01. Arbitration. 12

ART ICLE XV ST AT UT ORY FINANCIAL CREDIT ; RESERVES; 13
Section 15.01. Statutory Financial Statement Credit 13

Section 15.02. Reserves 13
ART ICLE XVI MISCELLANEOUS 13
Section 16.01. Governing Law 13

Section 16.02. Notices 13
Section 16.03. Integration 14
Section 16.04. Assignment 14
Section 16.05. Severability 14
Section 16.06. Counterparts 14
Section 16.07. Interpretation 14
i
Exhibits
Exhibit A Covered Policies
Exhibit B Estimated Effective Date Reserves
ii
QUOTA SHARE REINSURANCE AGREEMENT
This QUOTA SHARE REINSURANCE AGREEMENT (this “Agreement”), dated as of February 17, 2009, is entered into by and between MBIA
Insurance Corporation, a New York stock insurance corporation (the “Company”), as reinsured, and MBIA Insurance Corp. of Illinois, an
Illinois stock insurance company (the “Reinsurer”), as reinsurer.
In consideration of the mutual covenants and upon the terms and conditions set forth in this Agreement, the Company and the Reinsurer
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. As used herein:
“Administrative Services Agreement” shall mean the Administrative Services Agreement entered into by and between the Company and
the Reinsurer, entered into as of February 17, 2009, pursuant to which the Reinsurer agrees to perform administrative services on behalf of the
Company with respect to the Issued Covered Policies, the Assumed Reinsurance Agreements, the Third-Party Reinsurance Agreements and
the Assumed Covered Policies Services Agreement.
“Allocated Loss Adjustment Expenses” shall mean all court costs, interest upon judgments, and mitigation, investigation, adjustment,
and legal expenses chargeable to or incurred in: (i) the mitigation, investigation, negotiation, settlement of or defense against a Loss, (ii) loss
prevention, mitigation, or investigation in respect of Issued Covered Policies as to which the Company has posted a loss reserve, (iii) the
investigation, prevention and workout of a potential Loss, (iv) the protection, perfection and exercise of any subrogation or salvage or
reimbursement rights or security interests with respect to an Issued Covered Policy or (v) any deficiency resulting from loss settlement or
workout of potential loss. “Allocated Loss Adjustment Expenses” shall exclude all office expenses and salaries of officials and employees of
the Company.
“Assumed Covered Policies” shall mean those Covered Policies which are reinsured by the Company.
“Assumed Covered Policies Services Agreements” means, to the extent such agreements relate to the Assumed Covered Policies, those
agreements pursuant to which the Company provides administrative services with respect to the Assumed Covered Policies.
“Assumed Reinsurance Agreements” shall mean, to the extent such agreements relate to Assumed Covered Policies, those agreements
of assumed reinsurance whereby the Company reinsures one or more of the Assumed Covered Policies.
“Bondholder” shall have the meaning set forth in Section 9.01.

“Business Day” shall mean a day other than (i) a Saturday, (ii) a Sunday or (iii) a day on which banking institutions or trust companies in
the City of New York, New York are authorized or required by applicable law, regulation or executive order to remain closed.
“Ceding Commission” shall have the meaning set forth in Section 8.01.
“Ceding Insurers” shall mean the ceding insurers under the Assumed Reinsurance Agreements.
“Closing Date” shall mean the date of this Agreement.
“Company” shall have the meaning set forth in the introductory paragraph.
“Covered Policies” shall have the meaning set forth in Section 2.01.
“Effective Date” shall have the meaning set forth in Section 4.01.
“Effective Date Reserves” shall mean the aggregate net Loss and unearned premium reserves of the Company with respect to the
Covered Policies as of the Effective Date.
“Estimated Ceding Commission” shall have the meaning set forth in Section 8.01.
“Estimated Effective Date Reserves” shall have the meaning set forth in Section 8.01.
“Exclusions” shall have the meaning set forth in Section 3.01.
“Extra Contractual Obligations” means all liabilities (i) for compensatory, consequential, exemplary, punitive or similar damages which
directly relate to any alleged or actual act, error, omission, fraud or misrepresentation by any Person, any of its affiliates or any of its or its
affiliates’ officers or employees, whether intentional or otherwise, in connection with the Covered Policies or (ii) from any actual or alleged
reckless conduct or bad faith by any Person, any of its affiliates or any of its or its affiliates’ officers or employees in connection with such
Person’s handling of any claim under any of the Covered Policies (including the settlement, defense of, or appeal of any claim) or in
connection with the issuance, offer, sale, delivery, cancellation or administration by any Person or any of its affiliates or any of its or its
affiliates’ officers or employees of any of the Covered Policies.
“FGIC Reinsurance Agreement” shall mean that certain Reinsurance Agreement dated as of September 30, 2008 by and between the
Company and Financial Guaranty Insurance Company, a New York insurance corporation.
“Fee” shall mean a structuring fee, commitment (including forward commitment) fee, restructuring fee, make-whole payment, residual or
other amount received by the Company in connection with a Covered Policy.
“Insolvency Fund” shall mean any Guaranty Fund, Insolvency Fund, Plan, Pool, Association Fund, or other arrangement, howsoever
denominated, established or governed, which provides for any assessment of, or payment, or assumption by the Company of part or all of any
claim, debt, charge, fee, or other obligation of an insurer, or its successors, or assigns which has been declared by any competent authority to
be insolvent or which otherwise is deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.
2
“Issued Covered Policies” shall mean those Covered Policies which are issued by the Company.
“Issue” as used in this Agreement means all obligations of one Issuer sold or created simultaneously and which are secured by a single
revenue source (with essentially the same structure), accepting credit risk on a common pool of reference credits or obligations. The Company
shall be the sole judge of what constitutes one Issue.
“Issuer” as used in this Agreement means, with respect to an Issue, the entity issuing the bonds, notes or other instruments comprising
the Issue or the entity whose obligations are the subject of a Covered Policy or several related Covered Policies. The Company shall be the
sole judge of what constitutes one Issuer.
“Loss” shall mean (i) amounts incurred by the Company in settlement or satisfaction of claims under or in respect of Issued Covered
Policies, (ii) any and all Allocated Loss Adjustment Expenses incurred by the Company under or in respect of Issued Covered
Policies, (iii) amounts payable to Ceding Insurers under and in respect of Assumed Covered Policies and (iv) Extra Contractual Obligations
arising after the Effective Date from acts, errors or omissions of the Reinsurer, in each case of (i), (ii), (iii) and (iv), net of amounts actually
collected by the Company or the Reinsurer under the Third-Party Reinsurance Agreements.
“Person” shall mean any individual, corporation, limited liability company, association, joint-stock company, business trust or other
similar organization, partnership, joint venture, trust, unincorporated organization or government or any agency, instrumentality or political
subdivision thereof.
“Payees” shall have the meaning set forth in Section 9.01.
“Quota Share” shall mean one hundred percent (100%).
“Ratings Agencies” means Moody’s Investors Service or any successor thereto and Standard & Poor’s Ratings Services or any
successor thereto.
“Recovery” shall mean any amount actually received by the Company in respect of any Loss covered by the Reinsurer under this
Agreement whether by subrogation, salvage, reimbursement or other recovery from the Issuer, Ceding Insurers or from any other party.
“Recovery Expenses” shall mean any expense, including court costs and legal expenses, incurred by the Company for purposes of
obtaining a Recovery with respect to Losses, but excluding the expenses or salaries of the officers and employees of the Company or its
affiliates or normal overhead expenses of the Company or its affiliates and excluding any expense that would constitute an Allocated Loss
Adjustment Expense.
“Refinanced Obligation” shall have the meaning set forth in Section 2.03.
“Refinancing Obligation” shall have the meaning set forth in Section 2.03.
3
“Reinsurer” shall have the meaning set forth in the introductory paragraph.
“Second-to-Pay Policy” shall mean the Financial Guaranty Insurance Policy, Master Policy No. MBNA-0001, issued by the Reinsurer to
The Bank of New York for the benefit of the Payees under the Covered Policies.
“Third-Party Reinsurance Agreements” shall mean, to the extent such treaties or agreements relate to Covered Policies, (a) all reinsurance
treaties and agreements to which the Company is a ceding party that were in force on the date hereof, and (b) any such treaty or agreement
that is terminated or expired but under which the Company may continue to receive reinsurance coverage.
ARTICLE II
BUSINESS COVERED AND ADMINISTRATION
Section 2.01. Business Covered. This Agreement shall cover all insurance policies in effect as of the Effective Date and issued or reinsured by
the Company prior to the Effective Date that provide insurance against financial loss by reason of nonpayment of obligations arising under
Issues sold or created by Issuers and characterized by the Company as United States public finance business, other than policies reinsured by
the Company under the FGIC Reinsurance Agreement (collectively, the “Covered Policies”) including, but not limited to, the policies set forth
on Exhibit A .
Section 2.02. Quota Share Reinsurance. Subject to the terms and conditions of this Agreement, the Company hereby cedes to the Reinsurer,
and the Reinsurer hereby accepts and reinsures, the Quota Share of the Losses; provided, however, that, notwithstanding anything in this
Agreement to the contrary, any payment by the Reinsurer in respect of a Covered Policy under the Second-to-Pay Policy shall, to the extent of
such payment, discharge the Reinsurer from its related payment obligation to the Company under this Agreement in respect of the Covered
Policy. For the avoidance of doubt, (i) the Reinsurer assumes the risk that reinsurance under the Third-Party Reinsurance Agreements is not
collected and (ii) the Reinsurer shall not be required to pay or reimburse the Company for Losses paid prior to the Effective Date. As soon as
practicable following the Closing Date, the parties shall settle any amount due each other under the terms of this Agreement for the period
between the Effective Date and the Closing Date.
Section 2.03. Refinancing. In the event of a refinancing (whether by refunding or otherwise) of the obligations insured under a Covered Policy
(the “Refinanced Obligations”) by the issuance of new obligations that are insured by the Company or a Ceding Insurer (the “Refinancing
Obligations”), (i) undertaken, in the sole judgment of the Reinsurer on behalf of the Company, to mitigate, prevent or improve the Company’s
position in respect of a claim or loss under the Covered Policy or (ii) undertaken, in the sole judgment of the Reinsurer on behalf of the
Company, to improve the credit quality or credit risk profile of the related Covered Policy or exposure, (iii) structured with terms or pricing that,
in the sole opinion of the Reinsurer on behalf of the Company, are less attractive than current market terms or pricing for such a transaction
but are undertaken because the pricing or terms in the Reinsurer’s sole opinion on behalf of the Company, are superior to the original structure
or (iv) undertaken by a Ceding Insurer pursuant to the terms and conditions of an Assumed Reinsurance Agreement, the Reinsurer shall
automatically assume under this Agreement the same Quota Share of the Refinancing Obligations as the Reinsurer assumed of the Refinanced
Obligations. Any Covered Policy issued by the Company or a Ceding Insurer in respect of the Refinancing Obligations shall be deemed to be
a Covered Policy hereunder to the same extent as that of the original Covered Policy.
4
Section 2.04. Administration. Pursuant to the Administrative Services Agreement, from and after the date hereof, the Reinsurer shall
administer the Issued Covered Policies, the Assumed Reinsurance Agreements, the Third-Party Reinsurance Agreements and the Assumed
Covered Policies Services Agreements directly on behalf of the Company. Pursuant to the terms of the Administrative Services Agreement,
the Reinsurer will provide to the Company accounting and other reports as to the Issued Covered Policies, the Assumed Reinsurance
Agreements, the Third-Party Reinsurance Agreements and the Assumed Covered Policies Services Agreements.
Section 2.05. Second-To-Pay Policy. The parties hereto acknowledge that as additional consideration for the Company entering into this
Agreement, the Reinsurer agreed to issue the Second-To-Pay Policy. The Company agrees and acknowledges that any payment by the
Reinsurer in respect of a Covered Policy under the Second-To-Pay Policy shall, to the extent of such payment, discharge the Reinsurer from its
related payment obligation to the Company (or to its liquidator, receiver, conservator or statutory successor) under this Agreement in respect
of such Covered Policy, as well as from its obligation under Section 9.01(a) to make the related payment in respect of such Covered Policy
directly to the applicable Payee.
ARTICLE III
EXCLUSIONS
Section 3.01. Exclusions. This Agreement shall not apply to and specifically excludes loss, damage, cost or expense of any nature directly or
indirectly caused by, resulting from or in connection with any of the following, regardless of any other cause or event contributing
concurrently or in any other sequence to the loss (“Exclusions”):
(a) all liability of the Company arising by agreement, operation of law, or otherwise from its participation or membership, whether
voluntary or involuntary, in any Insolvency Fund; and
(b) all liability for Extra Contractual Obligations arising prior to the Effective Date or arising after the Effective Date from acts, errors
or omissions of the Company.
The Company shall indemnify the Reinsurer for any liability of the Reinsurer arising from any Exclusions.
5
ARTICLE IV
COMMENCEMENT; AMENDMENT
Section 4.01. Commencement. This Agreement shall become effective as of 12:01 a.m. on January 1, 2009 (the “Effective Date”), and shall
remain in full force and effect until all obligations of the parties under this Agreement have been satisfied.
Section 4.02. Amendment. This Agreement may only be amended by written agreement of the Company and the Reinsurer.
ARTICLE V
THIRD-PARTY REINSURANCE AGREEMENTS
Section 5.01. Payment of Reinsurance Premium. The Reinsurer shall be responsible for paying all payments of premiums, payments, fees and
other consideration or amounts due under any Third-Party Reinsurance Agreements to the applicable third party reinsurers to the extent such
amounts relate to the Covered Policies.
Section 5.02. Reinsurance Recoveries. The Reinsurer shall be entitled to its Quota Share of all amounts actually collected under the Third-
Party Reinsurance Agreements from and after the Effective Date relating to the Covered Policies. The Company shall promptly remit to the
Reinsurer any such amounts received by the Company. The Reinsurer shall promptly remit to the Company any amounts with respect to the
Third-Party Reinsurance Agreements received by the Reinsurer to the extent that such amounts relate to business of the Company other than
the Covered Policies. If, after the Effective Date, any Third-Party Reinsurance Agreements are commuted, (a) the Company will promptly pay
the Reinsurer all amounts received upon such commutation in respect of the Covered Policies that relate to statutory loss and unearned
premium reserves and (b) the Reinsurer will promptly pay to the Company a ceding commission equal to twenty two percent (22%) of any
portion of such payment made to the Reinsurer under clause (a) above that relates to unearned premium reserves, which payment may be set
off against the payment set forth under clause (a) above.
ARTICLE VI
RECOVERIES
Section 6.01. Recoveries. The Reinsurer shall be entitled to its Quota Share of any Recovery.
Section 6.02. Recovery Expenses. The Reinsurer shall be responsible for its Quota Share of any Recovery Expenses.
ARTICLE VII
REINSURANCE FOLLOWS ORIGINAL POLICIES
Section 7.01. Follow the Fortunes. Except to the extent otherwise agreed between the Company and the Reinsurer in writing, all reinsurance
under this Agreement shall be subject in all respects to the same rates, terms, conditions, waivers and interpretations, and to the same
modifications, cancellations and alterations as the respective Covered Policies, the true intent of this Agreement being that the Reinsurer shall,
in every case to which this Agreement applies, follow the fortunes of the Company; provided, however, that this Article shall not be
construed to expand the liability of the Reinsurer beyond what is specifically assumed under this Agreement.
6
Section 7.02. Bound by Original Insurance. The Reinsurer acknowledges the obligations of the Company to make payment under the Issued
Covered Policies are unconditional, irrevocable and non-cancellable by the Company for any reason and that the Company has waived, and
agreed not to assert, any and all rights (whether by counterclaim, set-off or otherwise) and defenses (including any defense of fraud or any
defense based on misrepresentation, breach of warranty, or non-disclosure of information by any Person) whether acquired by subrogation,
assignment or otherwise to the extent such rights and defenses may be available to the Company to avoid payment of its obligations under
any Issued Covered Policy in accordance with the express provisions of any Issued Covered Policy.
Section 7.03. Third Party Rights. Except as set forth in Articles IX or X, nothing herein shall in any manner create any obligations or establish
any rights against the Reinsurer in favor of any Person not a party to this Agreement.
ARTICLE VIII
PREMIUMS AND COMMISSIONS
Section 8.01. Premiums and Commissions. In consideration of the parties’ obligations under this Agreement, the following payments shall be
made:
(a) The Company shall pay to the Reinsurer an amount equal to the Effective Date Reserves as follows:
(i) On the Closing Date, the Company shall pay to the Reinsurer an amount equal to the estimated Effective Date Reserves as
shown on Exhibit B (the “Estimated Effective Date Reserves”). The payment required by this Section 8.01(a)(i) shall be made by
delivery to the Reinsurer of cash and/or securities approved by the Reinsurer having a market value as of the market close on the
Business Day immediately prior to the Closing Date equal to the amount payable under this Section 8.01(a)(i).
(ii) Following the Closing Date, the parties agree to true-up the Effective Date Reserves. Within 60 days following the Closing
Date, the Reinsurer shall prepare and deliver to the Company a statement setting forth the actual Effective Date Reserves. No later
than five (5) days after receipt by the Company of the Effective Date Reserve true-up statement, the parties shall agree to the final
Effective Date Reserves amount and if the Estimated Effective Date Reserves was (a) less than the actual Effective Date Reserves,
the Company shall remit the difference to the Reinsurer or (b) more than the actual Effective Date Reserves, the Reinsurer shall
remit the difference to the Company. The true-up payment shall be made by delivery to the recipient party of cash and/or securities
approved by the recipient party having a market value as of the market close on the Business Day immediately prior to the date of
the true-up payment equal to the amount payable under this Section 8.01(a)(ii).
7
(b) The Reinsurer shall pay to the Company a ceding commission equal to twenty two percent (22%) of the amount of the unearned
premium reserves included in the calculation of Effective Date Reserves (the “Ceding Commission”) as follows:
(i) On the Closing Date, the Reinsurer shall pay to the Company an amount equal to twenty two percent (22%) of the amount of the
unearned premium reserves included in the calculation of Estimated Effective Date Reserves (the “Estimated Ceding Commission”),
which payment may be set off against the payment set forth in Section 8.01(a)(i).
(ii) Following the Closing Date, the parties agree to true-up the Ceding Commission. Within 60 days following the Closing Date,
the Reinsurer shall prepare and deliver to the Company a statement setting forth the actual Ceding Commission based on the actual
Effective Date Reserves. No later than five (5) days after receipt by the Company of the Ceding Commission true-up statement, the
parties shall agree to the final Ceding Commission and if the Estimated Ceding Commission was (a) less than the actual Ceding
Commission, the Reinsurer shall remit the difference to the Company, or (b) more than the actual Ceding Commission, the Company
shall remit the difference to the Reinsurer. The payment required by this Section 8.01(b)(ii) may be set off against the payment set
forth in Section 8.01(a)(ii).
(c) As additional consideration for the reinsurance provided under this Agreement, the Reinsurer shall be entitled to the Quota
Share of any installment premium and Fees and other amounts actually collected on or after the Effective Date by the Company or
the Reinsurer with respect to the Covered Policies. The Company shall promptly remit to the Reinsurer any such amounts received
by the Company.
(d) During the term of this Agreement, the Reinsurer will pay to the Company a ceding commission equal to twenty two percent
(22%) of all installment premiums due to the Reinsurer pursuant to Section 8.01(c). The Reinsurer shall pay the Company the
ceding commission pursuant to this Section 8.01(d) on a monthly basis as installment premium is received.
(e) If, after the Closing Date, it is discovered that an error or omission was made in the calculation of any amount due under this
Section 8.01, the parties shall rectify such error or omission as soon as practicable following discovery thereof. Without limiting
the foregoing, after the Closing Date, the Reinsurer will promptly upon notice remit to the Company, without any interest thereon,
any amounts paid by the Company to the Reinsurer pursuant to this Section 8.01, net of ceding commissions (without any interest
thereon) paid by the Reinsurer hereunder, with respect to any insurance policy that is determined not to have been a Covered
Policy as of the Effective Date. In addition, in the event that after the Closing Date it is discovered that an obligation insured by an
insurance policy for which amounts have been paid to the Reinsurer pursuant to this Section 8.01 had been refunded (in whole or
in part) prior to the Effective Date, the Reinsurer will promptly upon notice return to the Company, without any interest thereon, all
or a portion of the amounts paid by the Company to the Reinsurer pursuant to this Section 8.01 in respect of such insurance policy
to the extent necessary to put the Company in the same position it would have been in had the Company been made aware of
the refunding prior to the Closing Date, net of ceding commissions (without any interest thereon) paid by the Reinsurer in respect
thereof.
8
ARTICLE IX
CUT-THROUGH
Section 9.01. Cut-Through.
(a) During the term of this Agreement, the Reinsurer, on behalf of the Company, will pay directly to the applicable holder of the
insured securities or obligations thereunder (“Bondholder”), to the trustee, paying agent or other third party fiduciary acting on
behalf of such Bondholder, to the Company’s fiscal agent under an Issued Covered Policy, to any other Person that is entitled to
receive payment from the Company under the terms of an Issued Covered Policy or to a Ceding Insurer, as the case may be, (any
such Bondholder, other Person or Ceding Insurer, a “Payee”), in accordance with the terms of the Issued Covered Policy or
Assumed Reinsurance Agreement, 100% of any claim due and payable by the Company under such Issued Covered Policy or
Assumed Reinsurance Agreement in respect of an Assumed Covered Policy, subject to the terms, conditions, exclusions and
limitations of such Issued Covered Policy or the applicable Assumed Reinsurance Agreement; provided, however, that,
notwithstanding anything in this Agreement to the contrary, any payment by the Reinsurer under the Second-to-Pay Policy in
respect of a Covered Policy shall, to the extent of such payment, discharge the Reinsurer from its obligation under this Section
9.01(a) to make the related payment directly to the applicable Payee. As a condition of the Reinsurer’s payment obligation under
this Section 9.01, the Payee shall provide written notice to the Reinsurer at the address specified in Section 16.02 of this Agreement
(or any other address identified in writing by the Reinsurer to such Payee) for any Loss for which the Reinsurer may be liable
pursuant to this Section. Any such payment by the Reinsurer shall discharge the Company from its related payment obligation
under or in respect of the subject Covered Policy and shall be treated as a payment by the Company for all purposes of such
Covered Policy and related documentation and otherwise, including for purposes of the Company’s claims under Third-Party
Reinsurance Agreements. All notice, claims and suits or actions on or in respect of such Covered Policy may be made directly to
the Reinsurer as though it had originally issued or reinsured such Covered Policy, as applicable. Without limiting any rights of the
Reinsurer set forth in the Administrative Services Agreement, in the event of any payment by the Reinsurer under this Section 9.01,
the Reinsurer shall have the right to mitigate loss or otherwise to exercise any right of the Company with respect to the loss or claim
under the Covered Policies. Upon termination of this Agreement by the Company and the Reinsurer for any reason, the rights of
the Payees to receive payments from the Reinsurer under this Section 9.01(a) shall cease immediately and automatically, without
any further action on the part of the Company or the Reinsurer. The Company and the Reinsurer agree that this Agreement may
not be terminated by them without obtaining the prior approval of the insurance department of each of their domiciliary states;
provided, however, that in no event shall the Reinsurer and the Company agree to terminate this Agreement unless, after giving
effect to such termination (including any simultaneous transaction by the Company), the ratings assigned by the Rating Agencies
to the underlying securities or obligations under the Covered Policies will not be downgraded or withdrawn.
9
(b) The Reinsurer shall have no obligation to indemnify the Company for amounts paid or payable by the Company in respect of a
Covered Policy to the extent of any payments made by the Reinsurer to the applicable Payee of such Covered Policy in accordance
with Section 9.01(a), and the Reinsurer shall be discharged of its payment obligations to the Company, or to its liquidator, receiver,
conservator, rehabilitator or statutory successor, under this reinsurance to the extent of such payments.
(c) The parties hereto acknowledge and agree that a Payee (including the Ceding Insurers) shall be entitled, as an express third-
party beneficiary, to enforce against the Reinsurer its obligations to make payment directly to such Payee in the circumstances
described in this Section 9.01 to the same extent as if such Payee were a party hereto, it being understood that the third-party
beneficiary right of any such Payee hereunder pertains solely to the payment obligations under or in respect of the related Covered
Policy and does not pertain to any other provisions of this Agreement.
ARTICLE X
INSOLVENCY OF THE COMPANY
Section 10.01. Insolvency.
(a) In the event of insolvency and the appointment of a conservator, rehabilitator, liquidator or statutory successor of the
Company, the portion of any risk or obligation assumed by the Reinsurer hereunder shall be payable, subject to Sections 9.01(a),
9.01(b) and 10.01(b), by the Reinsurer to the conservator, rehabilitator, liquidator, receiver or statutory successor of the Company,
on the basis of the liability of the Company under the Covered Policies, without diminution because of that insolvency, or because
the conservator, rehabilitator, liquidator, receiver or statutory successor has failed to pay all or a portion of any claims, directly to
the Payees as their interest may appear.
(b) Payments by the Reinsurer as set forth above shall be made directly to the Company or to its conservator, rehabilitator,
liquidator, receiver or statutory successor, except where payment is made pursuant to Section 9.01. In the event that a Payee
submits a claim to the Company’s conservator, rehabilitator, liquidator, receiver or statutory successor, the Reinsurer shall have the
right to, in lieu of making a payment to such conservator, rehabilitator, liquidator, receiver or statutory successor, make a payment
on the claim directly to the Payee pursuant to Section 9.01 of this Agreement. Any such payment by the Reinsurer shall discharge
the Reinsurer from its related payment obligation under the subject Covered Policy. For the avoidance of doubt, the Payees are
specified payees of the reinsurance under this Agreement in the event of the insolvency of the Company, as permitted by Section
1308(a)(2)(B)(i) of the New York Insurance Law.
(c) In the event of the insolvency of the Company, the rehabilitator, liquidator, receiver, conservator or statutory successor of the
Company shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Company on each Covered
Policy within a reasonable time after such claim is filed in the insolvency proceeding, and during the pendency of such claim, the
Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated
any defense or defenses which it may deem available to the Company or its rehabilitator, liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation or rehabilitation to the extent of the share of the benefit which may accrue
to the Company solely as a result of the defense undertaken by the Reinsurer.
10
ARTICLE XI
OFFSET
Section 11.01. Offset. Except for payments to be made pursuant to Sections 8.01(a) and (b), which may only be offset against each other, the
Company and the Reinsurer may offset any balance or amount, whether on account of premiums, premium adjustments, commissions, claims,
Losses, Recoveries, or otherwise, due from one party to the other under this Agreement. The party asserting the right of offset may exercise
such right at any time whether the balance(s) due are on account of premiums or Losses or otherwise. In the event of the insolvency of a
party hereto, offsets shall only be allowed in accordance with applicable law, including Section 7427 of the New York Insurance Law. If
payments are required to be made directly by the Reinsurer to any Payees as provided for in Article IX, no offset shall be allowed between the
Reinsurer and such Payees; provided, however, that the Reinsurer shall continue to maintain its offset rights against the Company as set forth
in this Section 11.01.
ARTICLE XII
ERRORS AND OMISSIONS
Section 12.01. Errors and Omissions. Any inadvertent act, delay, omission or error by either party will not relieve the other party of any
liability which would have attached under this Agreement, provided that such act, delay, omission or error shall not impose any greater
liability on the Reinsurer than would have attached hereunder if such act, delay, omission or error had not occurred, and is rectified promptly
or reasonably upon discovery by the responsible party.
ARTICLE XIII
CURRENCY
Section 13.01. Dollars. Whenever the word “Dollars” or “dollars” or the “$” sign appears in this Agreement, they shall be construed to mean
United States Dollars and all transactions and reports pursuant to this Agreement shall be in United States Dollars except as otherwise
provided herein.
11
ARTICLE XIV
ARBITRATION
Section 14.01. Arbitration.
(a) Should an irreconcilable difference of opinion arise between the parties of this Agreement as to the interpretation of this
Agreement or the transactions contemplated by this Agreement, such difference shall be submitted to arbitration upon the request
of one of the parties, one arbitrator to be chosen by the Company and one by the Reinsurer and a third arbitrator to be chosen by
the two arbitrators before they enter into arbitration.
(b) Should the arbitrators fail to agree upon the choice of a third arbitrator within thirty (30) days of the appointment of the last
arbitrator, then each arbitrator shall name three candidates, of whom the other arbitrator shall decline two, with the decision among
those remaining to be made by drawing lots.
(c) In the event that either party should fail to choose an arbitrator within (60) days following a written request by the other party to
enter into arbitration, the requesting party may choose two arbitrators who shall in turn choose a third arbitrator before entering
into arbitration.
(d) Each party shall present its case to the arbitrators. The written decision of any two of the three arbitrators shall be final and
binding upon the Company and the Reinsurer.
(e) The arbitrators shall be relieved from all judicial formalities and may abstain from the strict rules of law, interpreting this
Agreement as an honorable undertaking rather than as merely a legal obligation. By agreement between any two of the three, they
may extend the time intervals contained in this Article.
(f) The arbitrators shall be active or retired disinterested executive officers of insurance or reinsurance companies.
(g) Each party shall pay the fee of its chosen arbitrator and half of the fee of the third arbitrator; the remaining costs of arbitration
shall be paid as the written decision directs.
(h) Any arbitration shall take place in the State of New York. In all cases, such arbitration will be governed by the rules of the
American Arbitration Association.
(i) Judgment may be entered upon the award of the Arbitrators in any court having jurisdiction.
12
ARTICLE XV
STATUTORY FINANCIAL CREDIT; RESERVES;
Section 15.01. Statutory Financial Statement Credit. The Reinsurer shall take all steps necessary to comply with all applicable laws and
regulations so as to permit the Company to obtain full credit for the reinsurance provided by this Agreement on its statutory financial
statements in all applicable jurisdictions, including compliance with Section 6906 of the New York Insurance Law. It is understood and agreed
that any term or condition required by any such laws or regulations to be included in this Agreement for the Company to receive statutory
financial statement credit for the reinsurance provided by this Agreement shall be deemed to be incorporated in this Agreement.
Section 15.02. Reserves. Without limiting the provisions of Section 15.01, the Reinsurer shall maintain its applicable share of the reserves
required to be established and maintained by the Company with respect to the Covered Policies reinsured hereunder under applicable law,
including but not limited to reserves for Losses, unearned premium reserves and contingency reserves.
ARTICLE XVI
MISCELLANEOUS
Section 16.01. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State
of New York applicable to agreements made and to be performed entirely therein without reference to such State’s principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be required thereby. If any term or provision of this Agreement shall
be held void, illegal or unenforceable, the validity of the remaining portions or provisions shall not be affected thereby.
Section 16.02. Notices. All reports, payments, remittances, notices, letters, financial statements or any other communications between the
parties to this Agreement shall be addressed as follows:
T o the Company:
MBIA Insurance Corporation.

113 King Street
Attn: General Counsel
Facsimile: (914) 765-3919
T o the Reinsurer:
with respect to notices pursuant to Section 9.01:
MBIA Insurance Corp. of Illinois

113 King Street
Armonk, NY 10504
Attn: IP M Surveillance – P ublic Finance
Facsimile: (914) 765-3555
with respect to all other notices under this Agreement:
MBIA Insurance Corp. of Illinois

113 King Street
Attn: General Counsel
Facsimile: (914) 765-3665
13
provided, however, that in the event a party notifies the other party in writing of a change in address, all such communications shall thereafter
be directed to the address indicated in such notice.
Section 16.03. Integration. This Agreement and the Administrative Services Agreement constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all other prior negotiations, commitments, agreements and understandings,
both written and oral, between the parties with respect to the subject matter hereof.
Section 16.04. Assignment. Neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by any
party hereto (including by operation of law) without the prior consent of the other party hereto and the prior approval of the insurance
department of each of the parties' domiciliary state; provided, however, that in no event shall the Reinsurer have the right to assign its rights
or obligations hereunder to any entity unless at the time of such assignment such entity has insurer financial strength ratings issued by the
Rating Agencies no lower than those of the Reinsurer at the time of such assignment. For the avoidance of doubt, except as set forth in the
immediately preceding sentence, no consent from any Person, including any Payee, shall be required for the Reinsurer to assign its rights
and/or obligations hereunder in accordance with the immediately preceding sentence.
Section 16.05. Severability. If any provision (or portion of a provision) of this Agreement shall be held to be invalid, illegal, or unenforceable
according to the laws, regulations, or public policy of any jurisdiction, the validity, legality, and enforceability of the remaining provisions (and
such portions of provisions) shall in no way be affected or impaired thereby, and such invalidity, illegality, or unenforceability of such
provision (or such portion of a provision) in such jurisdiction shall not affect the validity, legality, or enforceability of such provision (or such
portion of a provision) in any other jurisdiction.
Section 16.06. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 16.07. Interpretation. For purposes of this Agreement, (i) the words “include,” “includes” and “including” shall be deemed to be
followed by the words “without limitation,” (ii) the word “or” is not exclusive and (iii) the words “herein”, “hereof”, “hereby”, “hereto” and
“hereunder” refer to this Agreement as a whole and all schedules and exhibits referenced in this Agreement. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such term and to the masculine as well as to the feminine and neuter
genders of such term. Unless the context otherwise requires, references herein: (i) to Articles and Sections, mean the Articles and Sections of
this Agreement; (ii) to an Agreement, instrument or other document means such Agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (iii) to a statute
means such statute in effect on the date hereof and includes any regulations promulgated thereunder as in effect on the date hereof. Titles to
Articles and headings of Sections are inserted for convenience of reference only and shall not be deemed a part of or to affect the meaning or
interpretation of this Agreement.
[signatures appear on the following page]
14
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first written above.
MBIA INSURANCE CORPORAT ION
By: /s/ Ram D. Wertheim

Name: Ram D. Wertheim
T itle: Managing Director, General Counsel and Secretary
MBIA INSURANCE CORP. OF ILLINOIS
By: /s/ Daniel E. McManus

Name: Daniel E. McManus
T itle: Managing Director and Secretary
[Signature page to Reinsurance Agreement]
15
Exhibit A
COVERED POLICIES
[Redacted]
1
Exhibit A-1
ASSUMED COVERED POLICIES
[Redacted]
2
Exhibit B
ESTIMATED EFFECTIVE DATE RESERVES
[Redacted]

MBIA INC 8-K (Events or Changes Between Quarterly Reports) 2009-02-20

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SECURITIES AND EXCHANGE COMMISSION

Connecticut 1-9583 06-1185706

113 King Street,

Registrant’s telephone number, including area code:

Item 7.01 REGULATION FD DISCLOSURE.

Item 8.01 OTHER EVENTS.

Ratings Agency Announcements

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

By: /s/ Ram D. Wertheim

Date: February 20, 2009

EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K

Move Expected to Provide Critical Liquidity to the Municipal Bond Market

Pro Form a S tatu tory

MBIA Issues Letter to Owners

February 18, 2009

Rumors of Our Demise Have Been Greatly Exaggerated

Our New, U.S. Public Finance-Only Financial Guarantee Company

Not a Good Bank/Bad Bank Split

An Enduring Value Proposition

About National Public Finance Guarantee Corporation.

Our Goal for Capitalization

MBIA Insurance Corporation, MBIA U.K. and MBIA Mexico

QUOTA SHARE REINSURANCE AGREEMENT

MBIA INSURANCE CORP. OF ILLINOIS,

T ABLE OF CONT ENT S

ART ICLE I DEFINIT IONS 1

Section 1.01. Defined T erms 1

ART ICLE II BUSINESS COVERED AND ADMINIST RAT ION 4

Section 2.01. Business Covered 4

ART ICLE III EXCLUSIONS 5

Section 3.01. Exclusions 5

ART ICLE IV COMMENCEMENT ; AMENDMENT 6

Section 4.01. Commencement 6

ART ICLE V T HIRD-PART Y REINSURANCE AGREEMENT S 6

Section 5.01. P ayment of Reinsurance P remium 6

ART ICLE VI RECOVERIES 6

Section 6.01. Recoveries 6

ART ICLE VII REINSURANCE FOLLOWS ORIGINAL P OLICIES 6

Section 7.01. Follow the Fortunes 6

ART ICLE VIII P REMIUMS AND COMMISSIONS 7

Section 8.01. P remiums and Commissions 7

ART ICLE IX CUT -T HROUGH 9

Section 9.01. Cut-T hrough. 9

ART ICLE X INSOLVENCY OF T HE COMP ANY 10

Section 10.01. Insolvency. 10

ART ICLE XI OFFSET 11

Section 11.01. Offset 11

ART ICLE XII ERRORS AND OMISSIONS 11

Section 12.01. Errors and Omissions 11

ART ICLE XIII CURRENCY 11

Section 13.01. Dollars 11

ART ICLE XIV ARBIT RAT ION 12

Section 14.01. Arbitration. 12

ART ICLE XV ST AT UT ORY FINANCIAL CREDIT ; RESERVES; 13

Section 15.01. Statutory Financial Statement Credit 13

ART ICLE XVI MISCELLANEOUS 13

Section 16.01. Governing Law 13

Exhibit A Covered Policies

Exhibit B Estimated Effective Date Reserves

QUOTA SHARE REINSURANCE AGREEMENT

Section 1.01. Defined Terms. As used herein:

“Bondholder” shall have the meaning set forth in Section 9.01.