Shares of Bermuda-based bond insurer Security Capital Assurance jumped a staggering 76 percent in trading yesterday after New York state insurance regulators had talks with US banks aimed at raising capital for bond insurers.

However, after Wall Street's closing bell had sounded, SCA announced it did not intend to raise new capital to meet rating agencies' requirements.

Fitch Ratings had put pressure on SCA to raise $2 billion to maintain its AAA rating, but SCA announced yesterday it had no intention of raising the new capital.

"The unprecedented uncertainty and instability affecting our industry make it impractical to consider raising new capital at the present time," SCA's president and chief executive officer Paul Giordano said in a statement distributed by PR Newswire yesterday.

The company statement added that SCA would continueto pursue the other elements of its capital plan including, seeking to generate capital through reinsurance arrangements and restructuring certain insured obligations.

Two other Island-based bond insurers also surged on the markets, with RAM Holdings surging 31 percent to close on $1.50, while Assured Guaranty climbed 16 percent to reach $20.63.

The benefits spread to business insurer XL Capital Ltd., which owns a 46-percent share in SCA. XL's share price gained a healthy 13 percent, gaining for a second day after it had hit an eight-year low last Friday.

New capital may help preserve the top credit ratings for the bond guarantors such as MBIA Inc., the industry's largest, and halt any erosion of investor confidence in the $2 trillion of assets they guarantee. Ambac Financial Group Inc., MBIA's biggest rival, lost its AAA grade from Fitch Ratings this month on concern about rising defaults tied to sub-prime mortgages.

"Clearly the market likes it," said Gregory Peters, credit strategist at Morgan Stanley in New York. "But it's not an easy situation to fix. The intent is good but we need the details; the details matter."

The new capital may be as much as $15 billion, the Financial Times reported. MBIA rose $4.08, or 33 percent, to $16.61 in trading, while Ambac added $5.73, or 72 percent, to $13.70.

News of the meeting helped spur a rally in US stocks, which slid last Friday after Fitch lowered the rating of Ambac.

Moody's Investors Service and Standard & Poor's are reviewing Ambac and MBIA, both based in New York state, for possible downgrades. Insured municipal bonds usually carry the debt rating of the insurer rather than the underlying debt.

Downgrades may force sales by investors who are required to hold only the highest-rated bonds and cut profit for banks that have already posted more than $130 billion of write-downs and credit losses tied to the falling value of mortgage securities.