Plan to reinsure $800bn in securities turned down by one of three bond insurers

Warren Buffett, the world’s third-richest man, has offered to reinsure $800bn of US government securities, effectively assuming the insurance liabilities for municipal bonds.

The bonds are unwritten by three of the largest securities insurers – MBIA, Ambac and Financial Guaranty Insurance Co.

Berkshire Hathaway has reportedly set aside $5bn for the scheme and a letter from Ajit Jain, president of Berkshire Hathaway Reinsurance, to MBIA's bankers at Lazard Ltd has been leaked detailing the plan (see attachment on right), including a premium price of 150%.

However, as of close of play on Tuesday night, at least one of the three bond insurers had rejected Buffett’s offer.

Ambac released after the market closed, saying that it welcomes any "constructive offers to deal with the current uncertain environment." However the deal, it said, "would result in little to no net capital relief to support Ambac's ratings."