Bond insurers have built a business on paying close attention to risk. For the most part, these monolines have earned their esteem by establishing triple-A portfolios. However, recent drops in the ABX index and the widening of CDO spreads, as well as subprime downgrades, have turned the scrutiny back on these insurers, with market participants questioning the security of their highly rated RMBS exposure.

Indeed, the monoline business has gotten some bad press lately in connection with their exposure to subprime RMBS. Some market players - particularly ones that are shorting these insurers - have rubbed salt in the wound. For instance, a report by Pershing Square Capital Management Partner Bill Ackman called "Who's Holding the Bag?" asserts that some of these financial guarantors took on risky subprime investments without sufficient reserves.

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