Mumbai: Billionaire investor Warren Buffett's Berkshire Hathaway Inc has launched a bond insurer that would help state and local governments lower their borrowing costs, and possibly lure business from established rivals struggling with failing credit markets.

The new insurer, Berkshire Hathaway Assurance Corp., is expected to get a licence to operate from New York State's insurance department by Monday, US regulatory authorities said.

Berkshire Hathaway Assurance Corp would guarantee the bonds that cities, counties and states use to finance public works, a Wall Street Journal report said, quoting Buffett from an interview.

Berkshire Hathaway Inc owns some 50 businesses, including auto insurer Geico Inc. Buffett and Ajit Jain, who heads Buffett's insurance businesses, will also seek approval to operate in California, Puerto Rico, Texas, Illinois and Florida, the report said.

Buffet's entry into the bond insurance market comes amid warnings from credit rating agencies that some major insurers, including Ambac Assurance Corp. and MBIA Inc., may lose their triple-A ratings due to exposure to subprime mortgage debt.

Credit rating agencies are already reviewing the ratings of insurers like MBIA Inc and Ambac Financial Group Inc.

The new company will avoid investing in structured products, such as bonds backed by cash-generating assets such as mortgages and credit-card receipts, Buffet said.

Buffett is also planning expansion of the new insurance business into California, Florida, Illinois, Texas and Puerto Rico.

Separately, Omaha, Nebraska-based Berkshire agreed to buy the NRG NV reinsurance unit of ING Group NV for about 300 million euros ($441 million). The Dutch bank expects the transaction to close in the first half of 2008.

Municipal issuers finance such things as hospitals, road construction, schools, sewer systems and sports facilities.

Local governments seek bond insurance to reduce the perceived risk of owning their debt. That can attract more investors, resulting in lower borrowing costs and saving taxpayers money.