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Assured Guaranty, the UK water sector’s largest backer, has refused to insure financing efforts by any of the country’s utilities for more than a year, during which the sustainability of the heavily indebted sector has been called into question.
The New York-listed insurer has amassed more than $15bn of exposure to some of the most heavily indebted UK water utilities.
Despite repeated requests by water companies over the past 18 months, Assured Guaranty has refused to insure any of the bonds issued by the industry’s constituents since the summer of 2024, shortly after the parent company of Thames Water first defaulted on a bond, according to people familiar with the matter.
AG’s reticence comes at a time of uncertainty for the sector, which has seen cracks appear in the finances of some of its largest companies over the past year, leading to higher costs from some mainstream lenders.
The insurer has remained unwilling to back debt issued by any UK water company, despite chief financial officer Benjamin Rosenblum telling investors in February last year: “The macroeconomic background for the UK water sector looks pretty good.”
AG declined to comment.
AG’s largest exposures to the UK water sector are to its two most troubled constituents, Southern Water and Thames Water, which have $2.8bn and $2.3bn worth of bonds covered by the insurer, respectively.
Since its 2024 default, Thames Water — the UK’s largest water provider serving 16mn customers — has struggled to stay afloat under a debt pile that has grown to nearly £20bn, and has narrowly avoided temporary renationalisation.
Meanwhile Ofwat, the water regulator for England and Wales, is to be replaced following an independent review that deemed it not fit for purpose.
Despite Thames’s difficulties, Rosenblum said in February 2025 that when it comes to its $2.3bn exposure to the company “we do feel we’re going to get out of here with no loss”.
AG has also been asked to back bond sales by a number of UK water companies in the past few months but refused to participate, the people said. The sector has a total debt pile of around £60bn, meaning AG backs more than 10 per cent of its bonds.
The sector will also have to borrow heavily to fund $104bn of spending that the regulator has approved for the period from 2025 to 2030.
The so-called monoline insurer typically works with lenders financing US municipal government-backed infrastructure projects, providing cover that pays out to debt investors if a borrower defaults.
The company profits by taking a cut of the savings debt issuers make on their interest expense as a result of its backing.
By writing its own contracts and scooping up portfolios from competitors that collapsed after the global financial crisis, the monoline insurer has been ratcheting up its activity in the UK water sector over the past five years.
AG is part of a class of Thames Water bondholders including US hedge funds Elliott Management and Silver Point, which have provided the utility with emergency financing in order to prevent it sinking into temporary renationalisation.
The group is working on a deal that would see it seize control of Thames Water, which would make AG a shareholder of the utility. The emergency bid is still awaiting approval from Ofwat.
Rosenblum told investors last month: “For UK water, we’re 100 per cent focused now really on just Thames as being the only problem exposure there.”
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