Low interest rates, a slow recovery from the financial crisis, and a shrinking pool of its target market make for a less than ideal environment for municipal bond insurers.

In such conditions, the industry continued its steady contraction in 2012, with the total amount of long-term insured bonds decreasing by 13%. Total issuance decreased to $13.27 billion from $15.26 billion in 2011, according to Thomson Reuters data. In the broader market, however, issuance increased to $376.24 billion from $287.8 billion last year.

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