The amount of bonds wrapped by insurance declined 18% year-over-year in the first six months of 2026, despite another year of record supply.
The top two municipal bond insurers wrapped over $18.012 billion across 819 deals in the first half of 2026, down from $21.97 billion in 878 deals in 1H 2025, according to LSEG data.
Total bond insurance penetration for 1H is 6.2%.
Both par insured and bond insurance penetration are on pace to drop for the full year, compared to last year, Matt Fabian, president of Municipal Market Analytics, said in a June 23 report.
In 2025, bond insurance totaled $42.8 billion, while insurance penetration was 7.5%. The latter had already fallen from 2024's 8.2% penetration, in part due to pressure from underlying higher ratings and tighter spreads, he said.
The lower figures are "not about the insurers themselves but more the composition, the demand component and the primary calendar," Fabian said.
Regarding demand, near-record mutual fund and exchange-traded fund inflows have "deepened bids for typical insurance targets among mid-grade credits and longer maturities," he said.
Issuance during the first half of the year was just shy of $300 billion, down 5.2% year-over-year, according to LSEG.
"More of that supply carries higher ratings (as large, well-rated credits can more easily scale up bond issues), is a prepaid gas bond … and/or carries a shorter tenor (as issuers and underwriters evade what until recently was a demand-challenged long end)," Fabian said.
During the first half of the year, Assured saw bond insurance fall 31.7% year-over-year, according to LSEG.
"Our insured par is influenced by overall market activity, transaction size and the mix of business," said Robert Tucker, senior managing director of investor relations and communications at Assured Guaranty.
The decline in bond insurance in 1H was partly due to a reduced contribution from transactions with insured par exceeding $100 million, he said.
"During the first half, we continued to prioritize risk-based pricing and appropriate returns, while maintaining a disciplined underwriting approach, emphasizing credit quality and pricing levels that reflect the underlying risks," Tucker said. "This approach reinforces the continued confidence in the value that Assured Guaranty policies provide to both issuers and investors."
Despite the decline in bond insurance, Assured remained the top provider of bond insurance, Tucker said.
Assured insured $9.445 billion in 418 deals for a 52.4% market share in 1H, down from $13.838 billion in 473 deals for a 63% market share in 2025.
In the secondary market, Assured insured $571 million. Additionally, in a private-placement deal, the firm insured $444 million in taxable military housing bonds for Fort Carson and $102 million in taxable bonds (with a corporate CUSIP) for Brown University Health. Overall, Assured insured $10.7 billion, Tucker said.
Assured's insurance supported a wide range of deals, both large and small, with the larger transactions showing "sustained institutional demand for our guaranty," he said.
Including the private-placement and corporate CUSIP transactions, there were 17 large transactions, each with at least $100 million in par amount, Tucker said.
For the second quarter, these included $870 million for the Dormitory Authority of the State of New York, $330 million in student housing revenue bonds for the Kentucky Bond Development Corp. and $297 million in airport senior revenue bonds for California's Burbank-Glendale-Pasadena Airport Authority, he said.
Assured insured $2.6 billion of par across 54 primary and secondary deals in the double-A category, according to Tucker.
Investors value Assured's insurance as a layer of protection against issuer downgrade risk and to help preserve market value, he said.
Meanwhile, BAM is on a record pace this year, setting highs for primary market and total par insured in the first half. That momentum has continued with several large deals already in July, said Mike Stanton, head of strategy and communication at BAM.
BAM insured $8.567 billion, or a 47.6% market share, in 401 deals in the first half of 2026, compared to $8.132 billion across 405 deals in Q1 2025, or a 37% market share. A 5.4% increase year-over-year, according to LSEG.
Underwriters "proactively" used insurance on select maturities on some large deals to help expand the investor base, like the $125 million in Chicago's May $647 million water revenue bond sale, Stanton said.
BAM's Capital Markets desk executed over 700 insurance trades directly with investors looking to "manage their portfolio exposures or improve the marketability of their offerings, 60% above the prior year's activity levels," he said.
Secondary market activity was strong on higher-rated transactions — 29% of BAM's secondary insured par was rated double-A or higher — where adding the BAM wrap improves liquidity, he said.
Several large transactions in the second quarter included "sophisticated" higher education and aviation issuers, such as $269 million for student housing at the University of Arizona in Tucson, $224 million for Kean University in New Jersey, and $109 million for the Norfolk Airport Authority in Virginia, Stanton said.
In the third quarter, BAM has already participated in several sizable deals, including the recent $2.4 billion Aquarion deal.
BAM worked with the Aquarion deal team to find opportunities to use an insurance policy instead of "a cash deposit to the debt-service reserve fund for both the senior and the junior bonds: That drove savings by reducing the authority's overall financing need," Kevin Roberts, managing vice president in BAM's public finance group, told The Bond Buyer previously.
