No Insurance for Bond Insurance

According to recent blogs on Insurance Claims and Issues the Bond Insurance market is in serious risk of extinction. This is a result of the Mortgage market crisis which has resulted in substantial losses for municipal bond insurance companies, which in turn has caused credit rating agencies to reevaluate insurance backed bonds and give them lower ratings. Although this information seems mundane or even inocuous it has serious consequences for the bond insurance companies that have enjoyed a market niche by receiving lower ratings because there was rarely any defaults by the issuer. Ratings on insurance backed municipal bonds have now been readjusted to something less than an A rating to reflect the higher risk, which seriously undermines the confidence in their security. If insurance backed bonds are no longer any safer than regular bonds, then there is no need for this service and thus an industry that has been in existence since 1971 may cease to exist.

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