On September 22, New York Governor David Paterson announced that beginning in January New York State will begin to regulate part of the credit default swap market. The swaps falling within the new regulations will be considered insurance contracts, and therefore subject to state regulation. A swap will be deemed an insurance contract when the buyer of the swap owns the underlying security for which he is buying protection. Consequently, only entities licensed to conduct an insurance business can issue these swaps.
On the same date, the New York Insurance Department issued Circular Letter No. 19 (2008), which lays out best practices for financial guarantee insurers. The best practices limit financial guarantee insurers from guaranteeing collateralized debt obligations, require written risk control of underwriting policies, increase the minimum amount of capital and reserves a financial guarantee insurer must maintain, and institute measures aimed at limiting risks for financial guarantee insurers.