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Insurance Regulations and Dividends | 12 Months Ended
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Dec. 31, 2014
Insurance Regulations And Dividends [Abstract] |
Insurance Regulations And Dividends | Note 14: Insurance Regulations and Dividends MBIA Insurance Corp oration and National are subject to insurance regulations and supervision of the State of New York (their state of incorporation) and all U.S. and non-U.S. jurisdictions in which they are licensed to conduct insurance business. In order to maintain their New York State financial guarantee insurance license, MBIA Insurance Corporation and National are required to maintain a minimum of $65 million of policyholders’ surplus. MBIA UK is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. The extent of insurance regulation and supervision varies by jurisdiction, but New York and most other jurisdictions have laws and regulations prescribing min imum standards of solvency and business conduct, which must be maintained by insurance companies. Among other things, these laws prescribe permitted classes and concentrations of investments and limit both the aggregate and individual securities risks that MBIA Insurance Corp oration and National may insure on a net basis based on the type of obligations insured. In addition, some insurance laws and regulations require the approval or filing of policy forms and rates. MBIA Insurance Corp oration and National are required to file detailed annual financial statements with the NYSDFS and similar supervisory agencies in other jurisdictions in which it is licensed. The operations and accounts of MBIA Insurance Corp oration and National are subject to examination by regulatory agencies at regular intervals. NYIL regulates the payment of dividends by financial guarantee insurance companies and provides that such companies may not declare or distribute dividends except out of statutory ear ned surplus. Under the NYIL, the sum of (i) the amount of dividends declared or distributed during the preceding 12-month period and (ii) the dividend to be declared may not exceed the lesser of (a) 10% of policyholders’ surplus, as r eported in the latest statutory financial statements and (b) 100% of adjusted net investment income for such 12-month period (the net investment income for such 12-month period plus the excess, if any, of net investment income over dividends declared or distributed during the two-year period preceding such 12-month period), unless the Superintendent of the NYSDFS approves a greater dividend distribution based upon a finding that the insurer will retain sufficient surplus to support its obligat ions. In 2014, MBIA Insurance Corp oration did not declare or pay any dividends to MBIA Inc. or the holders of its preferred stock. MBIA Insurance Corp oration is currently unable to pay dividends, including those related to its preferred stock, as a resu lt of its earned surplus deficit as of December 31, 2014 and is not expected to have any statutory capacity to pay any dividends in the near term. In connection with MBIA Insurance Corp oration obtaining approval from the NYSDFS to release excessive cont ingency reserves in prior periods, as described below, MBIA Insurance Corp oration agreed that it would not pay any dividends without prior approval from the NYSDFS. A s a condition to the NYSDFS’ approval of the simultaneous repurchase and reverse repurchase agreement s (“Asset Swap”) b etween MBIA Inc. and National, the NYSDFS requested that, until the notional amount of the Asset Swap has been reduced to 5% or less of National’s admitted assets, each of MBIA Inc., MBIA Insurance Corporation and Nati onal provide the NYSDFS with three months prior notice, or such shorter period as the NYSDFS may permit, of its intent to initiate cash dividends on shares of its common stock. National declared and paid a dividend of $220 million to its ulti mate parent, MBIA Inc. in the fourth quarter of 201 4 following notice to the NYSDFS. As a result of the establishment of National, National and MBIA Insurance Corp oration exceeded as of the closing date certain single and aggregate risk limits under the NYIL. These insurers obtained waivers from the NYSDFS of such limits. In connection with the waivers, they submitted a plan to the NYSDFS to achieve compliance with the applicable regulatory limits. Under the plans, they agreed not to write new financial g uarantee insurance for certain issuers, and in MBIA Insurance Corp oration’s case, in certain categories of business, until they were in compliance with their single risk limits and agreed to take commercially reasonable steps, including considering reinsur ance, the addition of capital and other risk mitigation strategies, in order to comply with the regulatory single and aggregate risk limits. As a condition to granting the waiver, the NYSDFS required that, in addition to complying with these plans, upon wr itten notice from the NYSDFS, MBIA Insurance Corp oration and National, as applicable, would cease writing new financial guarantee insurance if it were not in compliance with the risk limitation requirements by December 31, 2009. National came into complian ce with its aggregate risk limits in 2011 and has a de minimis number of single risk limits overages remaining. As of December 31, 2014, MBIA Insurance Corporation was in compliance with its aggregate risk limits under the NYIL. If MBIA Insurance Corporation is not in compliance with its aggregate risk limit s, the NYSDFS may prevent MBIA Insurance Corporation from transacting any new financial guarantee insurance business until it no longer exceeds the limitations. During 2013, MBIA Insurance Corporation exceeded its aggregate risk limits. In 2014 and 2013, MBIA Insurance Corp oration reported additional overages to the NYSDFS with respect to its single risk limits due to changes in its statutory capital. Under the NYIL, MBIA Insurance Corporation is also required to establish a contingency reserve to provide protection to policyholders in the event of extreme losses in adverse economic events. The amount of the reserve is based on the percentage of principal insured or premiums earned, depending on the type of obligation (net of collateral, reinsuranc e, refunding, refinancings and certain insured securities). Under the NYIL, MBIA Insurance Corporation is required to invest its minimum surplus and contingency reserves, and 50% of its loss reserves and unearned premium reserves, in certain qualifying assets. Reductions in the contingency reserve may be recognized based on excess reserves and under certain stipulated conditions, subject to the approval of the Superintendent of the NYSDFS. Prior to September 30, 2012, MBIA Corp. released to s urplus an aggregate of $1.1 billion of contingency reserves pursuant to approvals granted by the NYSDFS in accordance with the NYIL during 2011 and 2012. Absent these releases MBIA Corp. would have had deficits of qualifying assets to meet its contingency reserve requirements. While MBIA Insurance Corporation currently satisfies its contingency reserve requirement, it had a deficit of qualifying assets required to support its contingency reserves as of September 30, 201 4. The deficit was caused by the sale of liquid assets in order to make claim payments and the failure of certain RMBS sellers/servicers to honor their contractual obligations to repurchase ineligible mortgage loans from securitizations the Company insured. The deficit m ay occur again in the future as MBIA Insurance Corporation depletes qualifying assets to make claims and commutation payments. As of 2014, MBIA Insurance Corporation’s policyholders’ surplus was negatively impacted by $106 million because under NYIL it was not permitted to trea t as an admitted asset the portion of its investment in subsidiaries in excess of the greater of 50% of policyholders’ surplus or 60% of net admitted assets less the par value of common, preferred stock and l iabilities. This overage was caused by a de crease in MBIA Insurance Corporation’s policyholders’ surplus due to insured losses in the past. MBIA Insurance Corporation’s policyholders’ surplus may be further negatively impacted if future additional insured losses are incurred and the percentage of its assets invested in subsidiaries continues to increase. R esults of operations for MBIA Insurance Cor p oration determined in accordance with statutory accounting practices for the years ended December 31, 2014 and 2013 were net losses of $35 million and $494 million, respectively. As of December 31, 2014, MBIA Insurance Corp oration’s statut ory capital was $859 m illion, consisting of policyholders’ surplus of $542 m illion and contingency reserve of $317 million. As of December 31, 2013, MBIA Insurance Co rp oration had statutory capital of $825 m illion. For the years ended December 31, 2014 and 2013, National h ad statutory net income of $238 million and $256 million, respectively. As of December 31, 2014, Nation al’s statutory capital was $3.3 billion, consisting of policyholders’ surplus of $2.2 billion a nd contingency reserves of $1.1 billion. As of December 31, 2013, National had statutory capital of $3.3 billion.

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