Although issuance of municipal bonds is down for 2014, there is a positive development in the re-emergence of bond insurers following their near disappearance after the 2008 mortgage security collapse. At that time, the $2.5 trillion bond insurance market collapsed and prominent insurers lost their triple-A ratings. Bond insurers had guaranteed more than half of the municipal bonds issued before 2008, but they insured just over three percent in 2012. The disappearance of bond insurance made it difficult for many issuers to access the market and attract investor interest.
Governing magazine reported in May that ratings for insurers are improving. While not yet back to triple-A, they are high enough to resume business. In March, Standard & Poor’s upgraded National Public Finance Guarantee Corp. to AA-minus and Assured Guaranty to AA. It is anticipated that with time insurers could re-attain their triple-A ratings, which could mean that issuers will be able to insure their bond deals more often and potentially at a lower cost.n
The Governing article is online at www.amwa.net/WUE_bond_insurance_comeback.