Financial Guaranty Insurance Company (the world’s third largest bond insurer) has had its credit rating downgraded along with Financial Guaranty Insurance Company and FGIC UK Limited from Aaa to A3. The insurance is facing a rise in claims resulting from the US sub-prime mortgage crisis. FGIC insures approximately $314 billion of debt and Moody’s estimates that it could face sub-prime mortgage bond claims of $9 billion, meaning the company’s reserves are around $4 billion short. FGIC is now separating out its business to protect its low-risk portfolio, which guarantees local government bonds used to finance infrastruture projects.