Bond insurance coverage sees positive factors in 2021

Bond insurance coverage rose 9% in 2021 as market demand continued to extend steeply, initially as a result of credit score considerations brought on by the pandemic.

As issuance hit $480.03 billion in 2021, the insurance coverage trade wrapped 7.8%, up barely from 7.1% in 2020. Offers with insurance coverage totaled $37.522 billion, greater than the $34.428 billion in 2020, in accordance with Refinitiv information.

The highest two insurers, Assured Warranty Municipal Corp. and Construct America Mutual, noticed will increase year-over-year. Assured Warranty accounted for a complete of $22.352 billion in 1,076 offers with 60.1% of the market share. In the meantime, Construct America Mutual insured $14.841 billion in 1,122 offers with 39.9% of the market share in 2021.

Tax-exempt points insured grew 3.3% to $23.658 billion whereas taxables rose 19.6% to $12.009 billion. New-money issuance with insurance coverage rose to $22.028 billion, a 9.3% achieve whereas refundings climbed to $11.895 billion, or 6.5%.

Each Assured Warranty and Construct America Mutual mentioned institutional traders, specifically, expanded their purchases of insured bonds to help broader portfolio administration strategies that optimize liquidity and ranking stability.

“An essential development lately has been that institutional traders have continued to acknowledge the worth of our warranty, enabling us to assist launch extra of the market’s largest transactions,” mentioned Robert Tucker, Assured Warranty’s senior managing director, Investor Relations and Communications.

“Total, it was an essential step ahead for the trade, that plenty of institutional traders specifically, who had turn into consumers of insured bonds instantly following the pandemic, continued to see the worth, whilst credit score circumstances normalized,” added Michael Stanton, BAM’s head of technique and communications.

Growth issuance lined rose 84.1% to $387.2 million. Electrical energy climbed 281.1% to $315.9 million. Transportation rose 87.7% to wrap $1.552 billion. Common goal grew 75% to cowl $3.062 billion.

State agency-insured debt hit $3.876 billion, or an 11.3% improve. Cities and cities accounted for $8.598 billion, up 31.3%. Native authorities dropped to $6.79 billion, down 4.9%. Schools and universities rose to $1.584 billion, a 42.7% improve over 2020.

Tucker mentioned for Assured, issuers utilizing bond insurance coverage have elevated to the very best charge in additional than 12 years at 8.7% in 2021. It was up from 7.6% in 2020 and 5.9% in 2019.

Assured offered $100 million or extra of bond insurance coverage for every of 48 massive points delivered to market in 2021, up from 39 transactions in 2020 and 22 transactions in 2019.

Along with the massive points assured in 2021, Assured additionally offered bond insurance coverage for lots of of smaller points, together with 450 sufficiently small to be bank-qualified, Tucker mentioned.

“We delivered worth for each massive and small transactions, negotiated transactions, and competitive-bid transactions in lots of market segments and throughout a large rankings spectrum,” he mentioned.

Construct America Mutual’s exercise was a part of a market-wide improve in bond insurance coverage use: final 12 months, 8.7% of all new points have been offered with insurance coverage, the very best degree since 2009.

For 2021, these transactions got here from 39 states, versus 40 states in 2020.

Furthermore, 20% of BAM’s new-issue insured par had public underlying rankings within the double-A class from S&P International Scores or Moody’s Traders Service, and BAM assured 46 transactions with par of $50 million or extra.

“It was one other very robust 12 months. We did $15.6 billion par within the main market, which was a brand new excessive for us, and actually mirrored within the progress within the insurance coverage market,” Stanton mentioned.

The BAM GreenStar program remained essentially the most lively third-party verifier of municipal bonds that align with the inexperienced bond ideas, bringing issuance to $1.7 billion in 2021 and greater than $3.5 billion for the reason that program’s launch in 2018.

“The largest a part of the BAM GreenStar program is sustainable water and wastewater investments. And these are initiatives which are being deliberate with a excessive degree of sustainability and the issuers speaking that to the market by promoting inexperienced bonds to finance,” Stanton mentioned. “That is turning into extra widespread.”