Municipal bond insurance continued its upward climb in 2015, closing the year with 6.26% market penetration, up from 5.56% the year prior.
In terms of total par volume insured, the industry grew 36.3% to $25.28 billion over 1,883 transactions from $18.55 billion in 1,405 transactions, far outpacing the total municipal market growth of 19.1%.
New-money insured deals totaled $8.24 billion in 794 transactions, up from $6.88 billion in 656 transactions in 2014. Refunding deals wrapped with insurance were up 42% to $12.94 billion in 913 deals from $9.11 billion over 660 deals.
Assured Guaranty lead the way, capturing 60% of the insured par and more than half of the insured transactions. Assured guaranteed $15.1 billion of par volume across 1,009 new issue transactions, including 662 issues of $10 million or less.
"We increased our primary-market insured par by $4.5 billion, or 41%, completing over 300 more transactions than in 2014," said Robert Tucker, head of investor relations and communications at Assured.
"We believe that investors clearly see the benefits of our guaranty and the value of our $12.4 billion of claims-paying resources, our approximately $400 million of annual investment income, our proven business model, and our public-company transparency standards," he said.
Tucker also said that the market liquidity for Assured's almost $300 billion of outstanding insured municipal bonds increased to an average daily trading volume exceeding $500 million in 2015.
"Assured Guaranty is the preferred insurance provider for smaller new issues. We also guaranteed 64 transactions with underlying ratings in the double-A category, demonstrating the exceptional ability of our guaranty to add value. Our total 2015 insured par sold for both primary and secondary markets was $16.1 billion," said Tucker.
Tucker went on to say that Assured continued to serve the public finance market by providing online credit summaries of obligors whose bonds Assured wraps and a searchable database of credits pre-qualified for the company's secondary market insurance, on the Assured website.
Build America Mutual has also done its part, posting a strong year for the company's core market, which is the smaller and mid-sized issuers where bond insurance drives the most value, according to Scott Richbourg, head of public finance for BAM.
"We completed more than 800 transactions and now have more than 1,700 municipal issuers as members," said Richbourg. "Focusing on that sector also gives us a more stable stream of transactions across the year because those issuers — which includes school districts, utility systems, and smaller cities and counties — are less likely to try and time the market with massive refundings. That steady stream of business allowed us to grow capital in every quarter."
The education sector saw the most usage of bond insurance, as that sector accounted for $10.53 billion of wrapped bonds. The next highest sector was the utilities sector, which posted a wrapped amount of $4.09 billion.
"The increased focus on disclosure nationwide also boosted interest in the BAM Credit Profiles we publish on our web site for every credit we insure, and which help our issuer members educate the broader market about their credit. We recorded more than 9,000 downloads during the year," Richbourg said.
Not to be forgotten is the third bond insurer writing new business, National Public Finance Guarantee Corporation. Tom Weyl, managing director and head of new business development at National said that the greater use of bond insurance in 2015 is especially noteworthy given the very difficult challenges that low interest rates create for the attractiveness of bond insurance.
"The increased bond insurance penetration in 2015 speaks very favorably for the market's growing appreciation of the benefits that our insurance provides to the issuers and buyers of insured muni debt," said Weyl.
National started writing new business in the third quarter of 2014 and according to Weyl, the company's progress and momentum from 2015 has carried over into 2016.
"We insured more transactions in the month of January than we had in any prior quarter since National has returned to writing business. While interest rates remain particularly challenging, we are very encouraged by the increasing number of transactions that are being shown to us and the greater number of firms considering bids from National."
