NEW YORK (Bloomberg) — Billionaire Wilbur Ross agreed to invest as much as $1 billion in Bermuda-based Assured Guaranty Ltd., giving the AAA rated bond insurer capital to win market share from MBIA Inc. and Ambac Financial Group Inc.

Ross is seeking to capitalise on the strength of Assured, one of two bond insurers whose credit ratings weren't threatened with a downgrade in the past three months. MBIA and Ambac, the two largest, have been losing business as they struggle to raise money to retain their AAA ratings.

Assured Guaranty rose as much as 16 percent in New York trading after WL Ross & Co., Ross's New York-based investment firm, agreed to buy $250 million of common shares and committed to purchase another $750 million at the company's discretion, Assured Guaranty said yesterday in a statement.

"This is opportunity capital rather than damage-curing capital," Ross said on CNBC Television.

Assured Guaranty and Dexia SA's Financial Security Assurance Inc. avoided much of the losses because they didn't expand as rapidly into guarantees on sub-prime-mortgage securities including collateralised debt obligations.

They were the only two AAA insurers to guarantee municipal bond insurance during the first two weeks of February, according to a Merrill Lynch & Co. report that cites preliminary data compiled by Thomson Financial. Assured Guaranty's new business production more than quadrupled in the fourth quarter, the company said earlier this month. In December, the company raised $318 million in a share sale to take advantage of demand.

Assured Guaranty closed up $2.87, or 12.6 percent, to $25.65 in New York Stock Exchange trading. The shares dropped 20 percent in the past year before today, compared with declines of more than 78 percent by MBIA and Ambac.

"This flexible capital source will allow us to continue to capitalise on the significant growth opportunities we see and will support our further expansion in both the direct and reinsurance markets," chief executive officer Dominic Frederico said in the statement.

Bond insurers are under scrutiny, including from issuers, as ratings on CDOs they guarantee have been slashed amid the highest rates of US foreclosures and home-price declines on record. Banks stand to lose as much as $70 billion on insured debt they own if the ratings of bond insurers are cut, according to Oppenheimer & Co. MBIA is writing "very little" new business amid the credit-market turmoil and scrutiny of its ratings, the Armonk, New York-based company said in a filing today with the US Securities and Exchange Commission.

"The demand for our product is the lowest it has been, and we are writing very little new business," MBIA said in the filing.

MBIA sold more than $1 billion of common shares to stave off a rating downgrade, including $800 million purchased by New York-based private-equity firm Warburg Pincus LLC. Its insurance unit also sold $1 billion in notes to help buttress its capital and convince ratings companies it can weather losses from debt tied to sub-prime loans, made to borrowers with poor credit. Ambac was given more time to raise capital by Moody's Investors Service, which said that may be enough to justify the company's AAA rating. Ambac's current capital exceeds the minimum required for a AAA, though is short of the targeted level, Moody's said in a statement yesterday.

Ross said he may still consider doing deals with other bond insurers. The investment may indirectly help some of the bond insurers. By insuring securities already guaranteed by rivals, Assured Guaranty would help them free up capital.

Ambac of New York said in December that Assured Guaranty agreed to reinsure $29 billion of Ambac-insured securities, taking on the risk of default of that debt. That freed up $225 million of capital for Ambac. Assured Guaranty said last month it has been increasing its business of selling protection on commercial asset-backed securities that are already guaranteed by competitors.

"Ross appears to be developing a platform to infuse capital into other bond insurance platforms through Assured Guaranty," said Robert Fuller, principal of Capital Markets Management LLC in Hopewell, New Jersey.

MBIA, Ambac and FGIC Corp., owned in part by Blackstone Group LP and PMI Group Inc., and Bermuda-based Security Capital Assurance Ltd. recorded losses of more than $8 billion on CDOs they guaranteed. MBIA's credit rating was reviewed for a downgrade by Moody's Investors Service and Standard & Poor's. Both affirmed their ratings this week after MBIA raised more than $3 billion in capital and agreed to stop guaranteeing asset-backed securities for six months.