Credit derivatives traders have agreed not to include the restructuring credit event for default swaps that reference monoline insurance companies. Lawyers said major market players agreed to make the switch on Sept. 15, because of complications with how the trigger would work.
The restructuring credit event can only be triggered when there is a deterioration in credit worthiness. This raises two complications with monolines. The first is that they wrap other entities' bonds, so this paper has two names attached to it and the second is that monolines' business models rely on maintaining their AAA status so they cannot suffer a credit deterioration and survive.
