In the evolving landscape of finance, bond insurance has emerged as a key player in the municipal bond market. As we review the performance of bond insurers during the first three quarters of 2024, it becomes clear that there’s a substantial upward trajectory in demand. A closer examination of the data reveals fascinating insights into investor behavior, market dynamics, and the strategic positioning of leading bond insurers.
According to recent information from LSEG, bond insurance saw a remarkable growth of 26.8% year-over-year, with the total debt wrapped soaring to $28.921 billion during this period. This figure is a stark increase from the $22.814 billion registered during the same timeframe in 2023. The number of deals that contributed to this growth also jumped significantly, reflecting an increase from 995 to 1,217 deals. This broad-based uptick signals a robust interest in the protective measures bond insurance provides and suggests that issuers are increasingly viewing bond insurance as a critical tool in managing their risk.
The competitive landscape within the bond insurance industry features two primary players: Assured Guaranty and Build America Mutual (BAM). As reported, Assured Guaranty has captured a dominant market share, accounting for 57.4% of the total bond insurance in 2024, amounting to $16.599 billion across 561 deals. This performance marks a strategic recovery for Assured, which had a share of 62.6% during the previous year. According to Robert Tucker of Assured Guaranty, this figure represents the second-highest par amount insured by the company in the last decade, showcasing its resilience and strategic prowess in the market.
On the other hand, BAM demonstrated an impressive upward momentum as well, insuring $12.322 billion in 656 deals, securing a market share of 42.6%. This sizable increase from $8.525 billion last year shows a growing affinity among investors for BAM’s insurance offerings. As Michael Stanton of BAM noted, the company’s total insurance in the first nine months of 2024 has already eclipsed its total for the entirety of 2023, indicating a significant expansion in their operational capacity and market reach.
One notable trend is the increasing size of insured transactions. Assured Guaranty reported that it insured 33 deals worth $100 million or more, led by substantial projects like the $1.1 billion Brightline Florida passenger rail project and an $800 million venture for the New Terminal One at JFK Airport. This trend of high-value deals reflects both confidence in major public infrastructure projects and the growing necessity for large financial backing, which bond insurance readily provides.
Build America Mutual also confirmed the rise in high-value deals, with 23 insured sales of $100 million or more reported in the first nine months of 2024, a jump from 18 in all of 2023. This demonstrates a shifting mentality among issuers and underwriters, who are increasingly recognizing the value of partial insurance on larger transactions.
The strikingly high interest from institutional investors has played a pivotal role in the growth of bond insurance. Both Assured Guaranty and BAM have benefitted from this trend, as institutional players seek out insurance policies that can mitigate risk and catalyze favorable financing conditions in a climate characterized by geopolitical uncertainty and environmental unpredictability.
Tucker articulated that the ongoing demand for these services leads to meaningful savings for issuers. Likewise, Stanton noted that a diverse mix of credits is enticing investors, creating a favorable environment for insurers. These conditions not only bring opportunities for bond insurers but also fortify the overall health of the municipal bond market by ensuring that investor confidence remains strong.
The bond insurance sector in 2024 is thriving, with substantial growth driven by both Assured Guaranty and Build America Mutual. The significant year-over-year increases in the amounts insured and the number of deals highlight a transformative period shaped by high-demand conditions. As municipal finance continues to navigate complex global challenges, the resilience and adaptation of bond insurers will be crucial in maintaining investor trust and ensuring financial stability. What becomes evident is that the future of bond insurance is bright, with expectations of continued growth and innovation as firms respond to market needs and investor expectations.