investors behind the formation of Bermuda's first AAA (Triple-A) rated financial guaranty insurance company.

ACE has taken a near 11 percent stake in holding company, CGA Group Ltd. based at Craig Appin House on Wesley Street, Hamilton, which has raised initial capital and commitments of $210 million and formed wholly-owned subsidiary Commercial Guaranty Assurance, Ltd. (CGA).

The AAA claims-paying rating from Duff & Phelps Credit Rating Agency (DCR), a leading rating agency in structured finance markets, is based on CGA's strong capitalisation principally, but also a sound business plan, management expertise and the strong investor group.

The company will provide AAA-rated guaranties to under-served sectors of structured finance, including commercial real estate securities, asset-backed securities (ABS) and mortgage-backed securities (MBS). The majority of insured securities will be investment grade, but the company will selectively insure securities that would be rated BB without insurance.

The company will target sectors of the trillion dollar commercial real estate market such as warehouse facilities and credit lines, commercial mortgage-backed securities (CMBS), real estate investment trusts (REIT), and lease-backed securities. It will also provide financial guaranties for a variety of non-traditional ABS, with a focus on re-packaged securities and emerging market ABS.

Co-founder, president and CEO of CGA Group Ltd., Richard A. Price, said, "We are uniquely positioned as the only financial guarantor to focus on the under served segments of the commercial real estate and private ABS markets. Our goal is to establish a strong trading value and liquid market for our insured securities.'' Richard Schoninger, managing director of CGA investor Prudential Services, said, "We expect CGA Group to be a responsive and creative force in real estate securitisation. They can add a lot of value by making complex structures more simple and generic.'' CGA president, Tony Montemurno, said yesterday, "We are one of a handful of companies in the world who are bond guarantors and the first who will put a focus to the commercial mortgage backed security. We are the Island's first financial guarantor and first AAA-rated company.'' CGA will obtain business from firms like investment banks and any other would-be issuer of collateralised securities, through brokers like J&H Marsh McLennan.

Mr. Montemurno said, "Bermuda used to be an off the track weigh station, but is now an integral part of the global capital markets. It is an important stop, virtually, in one's career in the insurance world.

"We chose Bermuda as our offshore domicile because it has the financial infrastructure we need. It has the accounting, law and underwriting infrastructure that we think is the best in the world. The broker market also works very effectively here, something else that was important to us.'' CGA will use a staff of about 15 (three underwriters) in Bermuda initially, and will out source some of the functions. The company's investment managers, for example, are J.P. Morgan in London and Alliance Capital. J&H Marsh McLennan will provide an insurance back-office function.

CGA Group has also created a New York-based investment and financial advisor that will counsel clients in evaluating financial assets and structuring transactions for insurance. The subsidiary will also provide investment management services to third party investors.

The group anticipates that their first client will be an offshore investor, who wants to invest in a wide variety of structured securities, including CMBS, MBS and ABS.

DCR said CGA's strong capitalisation was the primary reason for the AAA (Triple-A) rating. CGA has $205 million of aggregate claims paying resources, comprised of $125 million of cash capital, a $60-million capital commitment from the investors and a commitment for a $20-million excess of loss (XOL) reinsurance policy from a Capital Re Corp. subsidiary.

The investors include Capital Reinsurance Co. (12.5%), Pacific Mutual Life Insurance Co. (12.5%), Third Avenue Value Fund (10.71), J.P. Morgan Investment Management (11.05%), Olympus Partners (10.71%), ACE Ltd (10.71%), Lennar Partners (8.57%), Equitable Life Assurance (7.14%), Firemark (5.36%), Starwood Capital Group (3.57%), Mutual Shares (3.57%) and Prudential Securities (3.57% .