Bond Insurer Says Its Risk Exceeded Legal Limits

The bond insurer FGIC said on Wednesday that its exposure to mortgage losses exceeded legal risk limits and that it might raise loss reserves because of litigation related to the stricken German bank IKB.

“This is a bombshell,” said Rob Haines, senior insurance analyst at CreditSights in New York. “They are actually in violation of New York insurance law. If they don’t remediate this, the state has the ability to take control of the company.”