Bermuda-based bond insurer Assured Guaranty is well placed to take advantage of the difficulties of its bigger rivals, a JPMorgan analyst said on Friday.

In a note to clients, Andrew Wessel said Assured had secured seven times its normal monthly share of the municipal bond insurance market last month and had started 2008 in the same vein.

Assured is capitalising on the problems of its rival bond insurers, including MBIA, Ambac and Bermuda-based Security Capital Assurance (SCA), which have all been hit hard by their exposure to bonds linked to sub-prime mortgages.

Both Ambac and SCA have lost their AAA ratings from Fitch ratings.

Generally, a bond insurer relies on the triple-A rating to write new business.

Mr. Wessel said that Assured "has established itself as one of the few untarnished AAA-rated options for the insurance of debt, and we therefore expect new direct business to grow substantially in the next 12 months."

He upgraded the shares to "overweight" from "neutral".

Assured captured seven percent of the insured municipal market in December, up from the one percent average it has maintained over the past few quarters, Mr. Wessel wrote.

"By all indications Assured has continued to benefit from pain at its peers, insuring a rash of new business through the first three weeks of 2008," Mr. Wessel wrote.

Mr. Wessel's comments come after Assured announced this week that it would write down $303 million on credit derivatives in its fourth-quarter results.

Derivatives are financial instruments derived from bonds, loans, commodities, or currencies, or linked to specific events like interest rate changes.

Assured said its home equity credit line of business had suffered from rising delinquencies.

Bond insurers, which guarantee debt including bonds issued by municipalities, have been under increased scrutiny amid concern securities backed by risky mortgages will lead to a spike in insurance claims.

In December, Warren Buffett's Berkshire Hathaway Inc. opened a business to guarantee municipal bonds.

Assured shares climbed 28 cents, or 1.3 percent, to $21.46 on Friday.

The stock rose as high as $24.76 earlier in the session.

Other bond insurers also gained Friday on speculation billionaire investor Wilbur Ross would buy Ambac and on hope that a possible bail-out plan from the New York State Insurance Department will aid the companies.

SCA shares gained 13 percent on Friday to close on $2.97.

Meanwhil,e fellow Bermuda-based bond insurers RAM Holdings and Primus Guaranty lost 8.6 percent and 2.7 percent respectively.

Last Wednesday, the state insurance regulator met with about a dozen banks to brainstorm how to help bond insurers.