Warren Buffett plans to carve out his own niche to profit from the nation’s credit market turmoil. The billionaire’s Berkshire Hathaway (NYSE:BRK) announced his intentions to start up a bond insurer that aims to make it cheap for local governments to borrow and may prove to be a tough competitor for the trouble existing insurers. Shareholders are bullish on the developments that promise to put more of the firm’s massive cash reserves to work.

Berkshire Hathaway Assurance Corporation is set to open for business today in New York and will focus on guaranteeing bonds for cities, counties, and states to finance sewer systems, schools, hospitals and other public projects. Berkshire’s solid AAA rating, which is held by very few companies, is likely to go a long way in a market that has many people unsure of who they can trust. After all, firms like Ambac Financial and MBIA are now seen as at risk of losing their AAA ratings due to the increased risk of mortgage-related bonds that they insure.

Warren Buffett said in an interview that there appears to be a high interest in a new company to seek permission in other states that account for a large chunk of municipal-debt issuance. After New York, the firm will likely seek to do business in California, Puerto Rico, Texas, Illinois and Florida. The billionaire said they would move prudently but would commit quite a bit of capital if they like the business. And in the end, focusing on municipal debt is a relatively safe bet when compared to asset backed securities!

In the end, this is more great news for Berkshire Hathaway shareholders who are seeing Buffett partake in a buying spree into the market decline. Recently acquisitions combined with this new business should help the firm put some of its massive capital reserves to use. Combined, these factors make BRK a stock worth watching!

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