New York — The cost to protect against a default by
Credit-default swaps on Hartford jumped 165 basis points to a mid-price of 675 basis points, according to New York broker
An increase in the contracts, used to hedge against losses or to speculate on creditworthiness, represents a decline in investor confidence. Senate Majority Leader Harry Reid, in pressing for passage of a $700 billion financial system rescue plan, said yesterday that a "major" insurance company was about to go bankrupt if financial markets weren't calmed.
"We don't have a lot of leeway on time," Reid told reporters after a luncheon in Washington. "One of the individuals in the caucus today talked about a major insurance company—one with a name that everyone knows—that's on the verge of going bankrupt. That's what this is all about."
A spokesman for the senator later said Reid wasn't referring to anything specific
"Senator Reid is not personally aware of any particular company being on the verge of bankruptcy," wrote Jim Manely, the senator's spokesman. "He has no special knowledge about, nor has he talked to any insurance company officials. Rather, his comments were meant to refer to the conditions in the financial sector generally. He regrets any confusion his comments may have caused."
A Hartford spokeswoman, Shannon Lapierre, reiterated comments the company made yesterday in a statement. The company said it's "confident" in its financial strength and its ability to meet commitments to customers and is "living through a period of unprecedented market conditions."
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Source: Bloomberg