Large deals, strong demand lead to bond insurance growth

Investor demand for bond insurance remained strong during the first three quarters of 2024 as the amount of debt wrapped by bond insurance rose 26.8% year-over-year.

Municipal bond insurers wrapped $28.921 billion in the first three quarters of 2024, an increase from the $22.814 billion insured in the first three quarters of 2023, according to LSEG data.

The industry par amount was achieved in 1,217 deals versus 995 deals in Q1-Q3 2023.

Both insurers saw year-over-year growth. Bond insurance for Assured and BAM rose 16.2% and 44.5%, respectively.

Assured Guaranty (AGO) accounted for a total of $16.599 billion in 561 deals, accounting for 57.4% of the market share, compared to $14.289 billion in 464 deals for a 62.6% market share in the first nine months of 2023, according to LSEG data.

This is the second highest primary market par that Assured Guaranty (AGO) has insured in the last decade during the first three quarters, said Robert Tucker, senior managing director of investor relations and communications at Assured Guaranty (AGO).

In the first three quarters of the year, Assured insured 33 deals with $100 million or more in insured par, led by $1.1 billion of insurance for the Brightline Florida passenger rail project, $800 million for the New Terminal One at John F. Kennedy Airport and $831 million for a Dormitory Authority of the State of New York school district revenue bond issue, he said.

The firm also increased its insurance among AA credits from Moody's and S&P, Tucker said.

"This year, we also had an increase in the use of our insurance among AA credits, year-over-year, we insured 16% more policies and 25% more in par for the first nine-months for a total of 74 policies (20 of which were during the third quarter) and approximately $3.5 billion of insured par," Tucker said.

Meanwhile, Build America Mutual insured $12.322 billion in 656 deals, or 42.6% of the market share. That is up from $8.525 billion in 531 deals, or a 37.4% market share, in the first three quarters of last year, according to LSEG data.

BAM's total primary market par amount of $12.322 billion during the first nine months of this year is greater than the total par amount in all of 2023, said Michael Stanton, head of communications and spokesman for Build America Mutual.

The firm insured 23 new-issue sales with par of $100 million or more in the first nine months of 2024, compared with 18 in all of 2023, and "we're seeing underwriters utilize partial insurance on larger transactions to capture specific demand, like $95 million of insured par for the Municipal Electric Authority of Georgia that was part of a larger sale," he said.

BAM also insured $2.8 billion of municipal bonds with public underlying ratings in the double-A category or stronger from Moody's or S&P, according to Stanton.

Growth from both firms was predicated on strong demand and interest, especially from institutions.

"We benefited from greater overall issuance and strong investor demand for our insurance, including from institutional investors on some very large infrastructure transactions," Tucker said.

The firm continues to provide "meaningful financing cost savings for issuers and additional protection for investors in a time of geopolitical uncertainty and increasingly unpredictable environmental conditions," he said.

Meanwhile, BAM saw "strong demand for insurance from a wide range of investors on a diverse mix of credits, which is driving very strong results," Stanton said.

Strong institutional investor interest, he said, continues to drive insurance utilization on larger and higher-rated deals.

With the use of bond insurance, Tucker said, "issuers save on borrowing costs and investors have protection and security when unforeseen circumstances arise, along with the other benefits of our guaranty, including strong market liquidity and potential market value support."