Municipal Bond Forum

Home > Municipal Bond Forum > How does bond insurance work?

How does bond insurance work?


Regarding your article (“Muni Bond Insurance Rises, Delighting Investors, Issuers”), is there any organization that would step in to force muni bond insurers to pay in the case of a bond failure if the insurer for any reason tries not to insure the bond? If a bond failure occurs, do the insurers pay 100% of the bond value to the holder? If so, what is the average cost of these insurance policies?



James A. Klotz responds:

Bonds are fully insured for interest and principal. They can pay as the bond indenture dictates or may opt to accelerate the maturity date and retire the bonds currently in the event of a default.

Issuers, in most cases, pay a one-time fee of approximately 1% to 2% at the time of issuance, depending on the credit.


Jan 25, 2024

Start here.

Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.

     The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk