Glossary of Municipal Securities Terms

BOND INSURANCE

A guarantee by a bond insurer of the payment of the principal of and interest on municipal bonds as they become due should the issuer or obligated person fail to make required payments. Bond insurance typically is acquired in conjunction with a new issue of municipal securities, although insurance also is available for outstanding bonds trading in the secondary market. In the case of insurance obtained at the time of issuance, the issuer of the policy typically is provided extensive rights under the bond contract to control remedies in the event of a default. See: BOND INSURER; CREDIT ENHANCEMENT; CREDIT FACILITY; SECONDARY INSURANCE; SURETY BOND.

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