Bond insurance continued to grow in 2024, with insurance increasingly utilized by issuers and strong demand from retail and institutional investors.
Municipal bond insurance grew 24.4% in the first half of the 2024 year-over-year, according to LSEG data.
The top two municipal bond insurers wrapped $19.355 billion in 1H 2024, up from $15.561 billion of in 1H 2023, the data shows.
The industry par amount was achieved in 767 deals versus 622 deals a year ago.
Bond insurance penetration remained at 8.2% for the first half of 2024.
“Bond insurance is increasingly being utilized across a variety of transactions ranging from very small to very large in size,” said Robert Tucker, senior managing director of investor relations and communications at Assured Guaranty.
More investors have “realized that, in addition to the security it provides, bond insurance can support price stability and market liquidity, on transactions of all sizes, and that issuers use it to provide greater certainty of execution in less predictable market environments, in addition to reducing financing costs,” he said.
There was “strong interest from retail investors, who are historically the most-active users of insurance and represented the largest pool of demand for all municipal bonds in the first half,” said Mike Stanton, head of strategy and communications at Build America Mutual.
“We also saw continuing demand from institutional buyers who use insurance as a tool to diversify credit exposures and improve liquidity, particularly on larger and higher-rated transactions,” he said.
Assured Guaranty accounted for a total of $10.846 billion in 330 deals for a 56% market share in the first half of 2024, compared to $9.776 billion in 290 deals for a 62.8% market share in the first half of 2023.
Assured Guaranty continued its “market leadership position for the first half of 2024,” with its total par amount increasing 10.9% in 1H 2024 year-over-year, Tucker said.
In Q2, Assured’s primary market was at 58%, a 13% increase year-over-year for a total of $7.2 billion, he said.
“One driver of our production is the ongoing demand for our guaranty on larger transactions, which typically see interest from institutional investors,” he said.
In 1H, Assured insured 21 transactions that each utilized $100 million or more, 14 of which were in the second quarter, he said. The firm also added value on double-A credits during the first half of 2024, insuring $2.5 billion of par on 53 deals, Tucker said.
The firm saw “significant opportunities in large, high-margin transactions,” he said.
Assured backed several large deals, including $1.13 billion for the
Meanwhile, BAM insured $8.509 billion, or a 44% market share, in 437 deals during 1H 2024, up from $5.785 billion, or a 37.2% market share, in 332 deals in the first half of last year.
“With the very heavy primary market calendars we saw for most of the first half, issuers could use BAM insurance to stand out and attract more potential buyers, particularly from the institutional buy-side,” Stanton said
Of the deals in 1H, BAM covered 20 new-issue transactions with par of at least $100 million and insured over than $1.5 billion of bonds rated double-A or stronger, he said.
Along with the increased volume from “traditional” bond insurance users, there was “an uptick in utilization by revenue bond issuers and more insured debt from states like Oklahoma, Wisconsin, and Colorado,” Stanton said.
BAM insured its first two new-issue healthcare transactions during Q2 — $100 million of the Marshfield Clinic Health System in Wisconsin and $87 million for the Midland County Hospital District in Texas, he said.
Additionally, BAM also insured large deals for flagship public universities, airports, and public power agencies, Stanton said.
Standouts in higher education include $281 million for Florida State University, $270 million for the San Francisco Community College District and $210 million for the University of Oklahoma, he said.