NEW YORK (Bloomberg) — Municipal bond insurance is showing signs of renewal this year as new providers respond to demand from low-rated borrowers whose costs have increased three times as fast as for issuers with top credit grades.

Leading guarantee firms, including Ambac Financial Group Inc. and MBIA Inc. forfeited top credit ratings last year after losses related to subprime mortgage-backed securities. The amount of insured new issues plunged 64 percent in 2008 as the biggest bond-insurance firms wrote down at least $21.3 billion, according to data compiled by Bloomberg.

An early contender to replace them, Warren Buffett's Berkshire Hathaway Assurance Corp., was downgraded to Aa1 by Moody's Investors Service in April. The billionaire investor in February called tax-exempt bond guarantees "a dangerous business". His firm insured $3.3 billion in issues last year, ranking third in the industry.

Macquarie Group Ltd., Australia's biggest securities firm, from backing a new guarantor: Municipal and Infrastructure Assurance Corp. plans to sell its first policy by July.

Municipal and Infrastructure Assurance will join new subsidiaries of Ambac and MBIA, along with industry leader, Assured Guaranty Corp., a Bermuda-based company, in trying to revive so-called credit enhancements. In all, insurers covered $72 billion, or 18 percent, of new tax-exempt bonds last year. That was down from $201 billion, or 47 percent, in 2007.

The amount of insured issues may rebound to about 35 percent over the next two years, said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia.