Demand for deals carrying bond insurance remains strong for retail and institutional investors, as the amount of debt wrapped by insurance rose 2.6% in the first quarter of 2025 year-over-year.
Municipal bond insurers wrapped $7.316 billion in the first quarter of 2025, an increase from the $7.132 billion insured in the first quarter of 2024, according to LSEG data.
The industry par amount was achieved in 383 deals versus 318 deals in Q1 2024.
Assured Guaranty accounted for a total of $4.655 billion in 222 deals, accounting for 63.6% of the market share, up 23.1% from $3.782 billion in 152 deals for a 53% market share in the first quarter of 2024, according to LSEG data.
The firm's secondary market bond insurance activity picked up during the first quarter of 2025, producing $376 million of par, said Robert Tucker, senior managing director of investor relations and communications at Assured Guaranty.
In the first quarter, Assured provided eight deals with over $100 million of insured value, including $261 million for Indiana Municipal Power, $256 million for Sumter Landing Community Development District and $186 million for the Oklahoma Turnpike Authority, he said.
Among AA credits, the firm insured 53 primary and secondary transactions, totaling $1.7 billion of insured par during Q1, "further reflecting what we believe is the market's recognition of the value our guaranty can add, even to highly rated credits," Tucker said.
Meanwhile, Build America Mutual insured $2.661 billion in 161 deals, or 36.4% of the market share. That compares to $3.35 billion in 166 deals, or a 47% market share, in the first quarter of last year, according to LSEG data.
Despite the 20.6% year-over-year decline, the firm saw "a strong start to the year, with broad demand for BAM insurance across regions and sectors," said Mike Stanton, head of strategy and communications at BAM.
New-money sales dominated issuance in Q1, and the BAM-insured portfolio showed that, as 85% of the firms' insured par was for new infrastructure across various sectors, he said.
Noteworthy new-money deals included $180 million for the Kansas City Schools, Kansas; $125 million of taxable debt for UC Health in Cincinnati, Ohio; and $83 million for the Springfield Public Schools, Illinois, Stanton noted.
Additionally, more than 25% of BAM's insured par carried ratings in the AA category or stronger from Moody's Ratings or S&P Global Ratings, he said.
Both insurers commented about the importance of bond insurance.
"We continued to use our guaranty to help support some of the municipal bond market's largest transactions, and we see our success in this area as a gauge of the further growth of institutional demand for our guaranty," Tucker said.
This growth "reflects institutions' heightened appreciation of the relative price stability and increased market liquidity our insurance can provide, along with the reduced borrowing cost issuers receive," he said.
"The added security, liquidity and transparency of insured bonds helped drive strong institutional investor demand on larger and higher-rated transactions," Stanton said.
The strength seen in the first quarter has carried over into the second quarter, he noted.
"Demand for insured bonds accelerated starting in March, driven by rising market volatility, shifting economic and trade policies, and growing awareness of climate-related risks, such as wildfires," Stanton said.
Through May 16, BAM has insured $6.4 billion in the new-issue market this year — a 10.5% increase year-over-year, he said.
Last week alone, 17% of the $15 billion-plus primary calendar carried insurance, including $800 million of BAM-insured transactions, Stanton noted.
