Municipal bond insurance
Municipal bond insurance is an insurance that the insurance company guarantees to pay the coupon and principal payments should the issuer of the bond (the municipality) default. This reduces the risk to investors who are willing to accept a lower coupon rate for an insured bond issue compared to an uninsured issue.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Municipal bond insurance. An insurance company guarantees to pay the coupon and principal payments should the issuer of the bond (the municipality) default. This reduces the risk to investors who are willing to accept a lower coupon rate for an insured bond issue compared to an uninsured issue.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
