With the recent acquisition of holding company Financial Security Assurance Holdings Ltd. by Groupe Dexia, bond insurer Financial Security Assurance Inc. (FSA) will now be able to access a longer capital base, providing more flexibility to manage risk, officials at the company said.

Groupe Dexia, the largest municipal lender in Europe, recently announced the acquisition.

The $2.6 billion transaction, which is expected to close in the second quarter, will boost FSA's $1.5 billion capitalization.

"FSA is triple-A and we've always considered ourselves quite strong, but to have $8 billion of capital behind us instead of $1.5 billion, we think, gives us much to work with," said Robert Cochran, chairman and CEO at FSA.

It also means more revenue for the company.

"With a larger capital base, we may be able to book more of the income for the transactions we do," said Jeff Wolf, a vice president at FSA. "That is, we'll not re-insure as much. Like when we do a deal, we look at our capital base, and we look at our exposure to particular issuers, and if we have a higher capital base, we have more room to manage individual credits."

A larger capital base would also allow the company to book earnings from transactions more efficiently and help it retain a bigger percentage of its transactions, Wolf added.

The merger would not affect the way the company does business though. "We're not going to change our underwriting standards or our pricing discipline. We certainly will look to do all the good business that we could possibly do in the marketplace," said Cochran.

FSA will also be able to take advantage of Dexia's broad European client network.

"They're a bank and they're a lender so they bring a tremendous amount of context to the European market which is a big growth market for the asset-backed world, and this whole infrastructure industry," said Wolf. "We think they'll leapfrog us in terms of underwriting European business."

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