With increasing volatility and uncertainty, and the continued need for efficiency within the municipal market, bond insurance serves as a solution to the market's most challenging issues, as insured volume continues to grow year-over-year.
Municipal bond insurance volume grew 17.7% in the first three quarters of 2025 year-over-year, according to LSEG data. That outpaced the 11.8% growth of
The top two municipal bond insurers wrapped over $34.162 billion in Q1-Q3 2025, the data shows.
The industry par amount was achieved in 1,339 deals versus 1,225 deals a year ago.
Bond insurance starts to "make a lot of sense" as a financial tool, Paige Litten, a director at Assured Guaranty, said Monday at The Bond Buyer's California Public Finance conference in San Diego.
More and more buyers are not just looking at insurance as a credit enhancement, but also as a financing tool to attract buyers with different perspectives, she said.
"We've seen all buyers participate in deals with insurance across many different sectors, many different rating categories, and across the credit spectrum," Litten said.
Insurance can also address the market's fragmented nature, said Jeff MacDonald, head of fixed income securities at Fiduciary Trust.
"We're talking about a market with over 50,000 individual issuers, and the benchmark alone, which has certain qualifications, and it deals with over 60,000 individual bonds," he said.
Furthermore, for a "lot of smaller issuers where investors may not have the ability to do the credit work for, or they're not familiar with the credit, and it might be more difficult to expand that investor base if you're bringing a deal to market," MacDonald said.
That's where insurance is a "value add," especially for some of those smaller issuers that are less followed and less well-known, he noted.
Insurance is also a "great diversification" tool on the $1 billion to $2 billion mega deals coming to market, ensuring that "we're capturing all the buyers that are out there," said Jaclyn Mischler, co-head of municipal syndicate at Morgan Stanley.
And sometimes, insurance can mean the difference between a deal getting done or not getting done in the taxable space below $100 million, said Ed Tishelman, senior managing director at Siebert Williams Shank.
With portfolio managers managing multiple asset classes, including municipalities, and often on smaller deals, it gives their company the opportunity to come in on your deal, he said.
Bond insurance is even growing among some market players.
Hedge funds, for instance, are buying bonds for active insurance, even in the higher-rated categories, looking for that liquidity aspect, Litten said.
Both Assured Guaranty and Build America Mutual experienced growth during the first three quarters of the year, with the former seeing a 29% increase and the latter ticking up 2.4%.
Assured Guaranty wrapped $21.459 billion in 703 deals for a 62.8% insured market share in the first three quarters of 2025, up from $16.633 billion in 563 deals for a 57.3% market share in the first nine months of 2024.
The firm's secondary market bond insurance activity increased during this period, resulting in $1.5 billion of par, more than three times the year-over-year amount, said Robert Tucker, senior managing director of investor relations and communications at Assured.
"We believe that many secondary market investors purchase our insurance to manage the potential impact of economic conditions and market volatility on their investments," he said.
During the first three quarters, Assured Guaranty "guaranteed 42 transactions utilizing at least $100 million of its insurance, for $11.3 billion of insured par sold," he said.
In the third quarter specifically, Assured insured 15 transactions of $100 million or more, totaling $4.5 billion in par, including $422 million for Orlando, Florida; $600 million for the New York Transportation Development Corp.'s New Terminal One at JFK Airport; and $237 million for Park Creek Metropolitan District in Colorado, Tucker said.
"Some investors prefer to have the additional protection of Assured Guaranty insurance on their bonds with AA underlying ratings, as this can help protect the market value of the bonds in the event of unexpected underlying credit volatility," he said.
Assured Guaranty is rated AA by S&P Global Ratings and AA-plus by KBRA.
During the first nine months of 2025, Assured issued 132 policies on $5.8 billion of double-A par, 23 of which were in Q3 for a total of $801 million, Tucker said.
BAM insured $12.703 billion, or a 37.2% insured market share, in 637 deals during Q1-Q3 2025, compared to $12.4 billion, or a 42.7% market share, in 662 deals in the first nine months of last year. The third quarter was especially strong, with a 32% gain year-over-year.
"We saw growing demand for BAM's guaranty from investors who were looking to diversify their credit exposure and manage the increased potential for ratings volatility as Federal budget constraints impact some municipal issuer budgets," said Mike Stanton, head of strategy and communications at BAM.
That meant "more partial insurance on larger transactions and by first-time issuers of BAM-insured bonds: About a third of BAM's Q3 transactions were from new member-issuers, and more than a quarter of the par insured carried public underlying ratings in the AA category from S&P or Moody's," he said.
BAM insurance carries a AA rating and stable outlook from S&P Global Ratings.
Most of BAM's new-issue volume came from new-money investments, with the public power sector being particularly active, Stanton said.
"Issuers advanced capital plans to improve their transmission and generation capacity, aiming to remain ahead of growing demand from data centers and electric vehicles," he said.
Notable deals included $375 million for the Lower Colorado River Authority, $198 million for the Southern California Public Power Authority, and $108 million for the Long Island Power Authority, according to Stanton.
