FGIC, the troubled US bond insurer, is a step closer to avoiding insolvency after rival MBIA agreed to take over nearly $200bn of its municipal bond guarantees.

FGIC's regulator, the New York Department of Insurance, has been working for months to prop up the monoline, whose credit standing has been cut close to default status after its capital proved insufficient relative to projected losses on guarantees on bonds backed by mortgage-backed securities.