Reply #74: Question re: guaranteed investment contracts and subprime mess [View All]

[antigop]

From investopedia...guaranteed investment contracts

http://www.investopedia.com/terms/g/guaranteedinvestmentcontract.asp

What does it Mean? Insurance contracts that guarantee the owner principal repayment and a fixed or floating interest rate for a predetermined period of time.


Investopedia Says... Guaranteed investment contracts are typically issued by insurance companies and marketed to institutions that qualify for favorable tax status under federal laws. These products provide institutions with guaranteed returns.

Now here is the question...if these are typically issued by insurance companies...exactly, which insurance companies might those be? Would bond insurers issue guaranteed investment contracts?

Here is what the MBIA website says:

Guaranteed Investment Contracts (GICs)
MBIA Asset Management provides customized investments for bond proceeds and other public funds for such purposes as construction, loan origination, escrow and debt service or other reserve fund requirements. It also provides customized products for funds which are invested as part of asset-backed or structured product transaction. In both cases, a guaranteed investment can serve as an attractive alternative to traditional use of open market securities, at a higher yield and with full customization of cash flows. MBIA’s product line consists of investment agreements, flexible repurchase agreements, put agreements and forward delivery agreements. Investments carry MBIA’s Triple-A financial guarantee, and they make it possible for clients to minimize market risk through structured withdrawals, while investing to generate attractive returns until the funds are needed.

Edit to add: Any info would be appreciated.