The Definition of a Municipal Bond Insurer
The most basic definition of a municipal bond insurer is an entity that provides insurance to the issuer of municipal bonds and pays principal and interest in the event of default by the issuer.
Other People Are Reading
-
History
-
The first municipal bond issue was insured in 1971. Municipal bond insurers backed 60 percent of all issues as of 2007, compared to just 3 percent in 1980, according to industry data.
How Issuers Purchase Insurance
-
Issuers pay a premium to the insurer at the closing of the bond offering and that premium is dependent on the issuer's credit rating. Not all municipal bond issues qualify for insurance.
-
Major Municipal Bond Insurers
-
MBIA and Ambac Financial are the two largest municipal bond insurers and there are several other firms that compete in this industry as well.
Insurance For Investors
-
Individual investors can directly purchase insurance for their municipal bond investments and their insurance functions in exactly the same way as insurance purchased by an issuer.
Marketing the Bonds
-
Obviously, issuers want to sell as much of the bonds as they can and telling potential buyers that the issue is insured makes the bonds that much more marketable.
-
