Municipal bond insurance is staging a comeback, and it’s telling investors something important.

Through the first three quarters of 2025, insured municipal issuance rose 17.7%, exceeding the overall market’s 11.8% growth, according to The Bond Buyer.

It was a broad-based rise, as the two dominant insurers backed more than $34 billion across 1,339 deals, up from 1,225 a year earlier.

For investors, the increase in insurance isn’t just a technical data point, it’s a sign of confidence.

What rising muni insurance says about market confidence

Insurers are selective by design. They only guarantee issues they’ve independently analyzed and believe will perform well over time. The growth in insured volume means more deals are meeting those standards, a vote of confidence in the financial strength of issuers and the stability of the municipal bond market overall.

After a pullback following the 2008 financial downturn, bond insurance is once again playing a meaningful role in the municipal market (“Why Muni Insurance is Making a Comeback”). Before then, more than half of all new issues carried insurance, a level that reflected broad market confidence.

In 2008, the slowdown wasn’t about municipal performance. It stemmed from insurers’ exposure to mortgage and other securities unrelated to municipal bonds that faltered.

Today’s insurers operate with rebuilt capital and a clearer focus on their core business, and their renewed activity is widely viewed as a sign of confidence in municipal fundamentals and long-term value.

According to Assured Guaranty’s third-quarter report, insured new-issue par volume grew 21% compared to the same period last year, reflecting consistent demand from both institutional and individual buyers.

Build America Mutual, the other major insurer, reported its strongest quarterly totals since 2020, driven by transportation, utility and general obligation bonds.

That breadth underscores insurance isn’t being used only for complex or lower-rated credits, it’s being applied across core sectors of the market.

At the same time, issuers are using insurance strategically to broaden investor demand, while buyers welcome the added security and liquidity a guarantee can provide.

How muni insurance supports investors

Muni defaults remain extremely rare. S&P’s 10-year default rate for investment-grade munis is just 0.08%.

Yet insurance adds a second, institutional backstop. If an issuer ever misses a payment, the insurer steps in, ensuring uninterrupted income. That extra layer can help preserve market value during volatility and may improve liquidity if investors decide to sell.

Additionally, the timing aligns with a favorable market environment.

After two years of volatility, long-term muni yields remain near decade highs, creating a rare opportunity for investors to lock in attractive rates.

Insured bonds can make that step more comfortable, offering yields that often remain close to comparable uninsured issues, but with added peace of mind.

As Municipal Market Analytics notes, insured bonds have held a 7-8% market share for several years, a sign that shows bond insurance has become a normal part of how many issuers strengthen their credit and how investors add peace of mind to their portfolios. Even high-quality issuers are using insurance.

The takeaway for investors?

Bond insurance is returning because fundamentals appear strong and insurers see lasting value in the market. It reflects an environment where credit quality, yield and security are aligning – a rare combination that makes today’s municipal market especially attractive for thoughtful investors.