After ratings firm Moody's warned last week that it may downgrade bond insurers Ambac Financial (ABK) and MBIA Inc. (MBI: sentiment, chart, options) , both companies have stepped up with responses. While Ambac admitted that a ratings cut could leave it short of collateral, MBIA announced that it has sufficient cash and government securities to fund any potential termination payments sparked by a downgrade.

Clifford Corso, the company's chief investment officer, stated, "As we indicated last Thursday, during the past 3 months we've worked to minimize the consequences to MBIA resulting from any changes in rating opinions. As a result of these efforts, we are well-positioned to meet our future obligations on time and in full, irrespective of any downgrade."

MBIA says it currently holds $18.1 billion in outstanding liabilities related to its asset/liability management business, and $11.2 billion of those are guaranteed investment contracts (GIC). If Moody's were to hand out a downgrade to MBIA's insurance unit, up to $7.9 billion of the GIC portfolio could be terminated.

Despite the reassurances, MBI shares are down more than 6% in early trading, and are clinging to the 12 level and support from their 10-week moving average. By contrast, ABK is up nearly 4% this morning.