Bermudian bond insurer Assured Guaranty has struck a $13.5 billion reinsurance deal with Syncora Guarantee, a US subsidiary of another Bermudian company, Syncora Holdings.

Under the agreement, Assured will provide reinsurance, generally on a 100 per cent quota share basis, to SGI of approximately $13.5 billion of net par outstanding of SGI-insured financial guaranty insurance policies, representing approximately 91 per cent of SGI’s outstanding insured exposure.

The deal includes a commutation of a small book of business ceded to SGI by an Assured Guaranty affiliate.

As consideration for the transaction, SGI would pay approximately $360 million and assign over future instalment premium for the reinsured policies.

Frederick Hnat, SGI’s chief executive officer, said: “We are extremely pleased to enter into this reinsurance agreement which effectively caps our insured exposure, leaving SGI in a more stable financial position and making it possible for us to return value to our stakeholders, subject to approval, including by the New York Department of Financial Services. We look forward to working with Assured Guaranty in transitioning certain administrative functions associated with the ceded portfolio.”

In addition, SGI has also entered into an administrative services agreement with Assured Guaranty in which Assured Guaranty would provide certain administrative services with respect to the reinsured policies.

SGI said that it has the option to cede certain debt service reserve fund surety and interest rate swap policies for an immaterial additional premium payment.

The closing of this reinsurance transaction is subject to regulatory approvals, including New York Department of Financial Services approval of a payment of principal and accrued interest of at least $400 million on SGI’s surplus notes.