Lawsuits leave monolines' future in the balance

Two high-profile court cases involving FGIC and XL Capital Assurance could determine the fate of the troubled monoline insurance industry. If the verdicts go against the insurers, the damage would not just be to their reputation, but it would call into question the very viability of the business model they operate under. Radi Khasawneh reports

Battered by downgrades and escalating writedowns, and forced into emergency capital-raising, the last thing monoline insurance companies need is further bad press. Yet two separate lawsuits, filed in New York in March, could further damage their reputation and cause the market to question the validity and enforceability of monoline guarantees.

The suits involve New York-based Financial Guaranty Insurance Company and XL Capital Assurance, the financial guarantee subsidiary of Security Capital