BAM is a true monoline municipal bond insurer that only guarantees transactions from issuers that provide essential public services.
The U.S. municipal market is one of the most diverse, heterogeneous markets in the world with many different types of issuers, distinct sectors, and a wide variety of security types. BAM’s focus means that its insured portfolio is backed by reliable revenue streams, with low volatility and minimal political risk.
BAM’s Insurable Sectors Have Historically Performed Well
The segment of the municipal market in which BAM operates represents more than 80% of the outstanding municipal debt, yet has been the source of only 20% of the monetary defaults in the outstanding market. Additionally, the default rate for municipal bonds issued for essential governmental purposes is estimated to be between .03% and .06%, even during periods of economic and financial stress like the Great Recession and the COVID pandemic. Further, virtually all defaults in the essential purpose sectors are not terminal defaults but are interruptions in bond payments that typically last only a few years. In other words, loss severity is low as a percentage of the par amount insured. BAM’s insurance policies cover principal and interest, as scheduled, and no payments on insured bonds are subject to acceleration or early call.
Bond sectors insured
- G.O., General fund and tax-backed
- Utility revenue bonds
- Transportation revenue bonds
- Public colleges and universities
- Special assessment, tax increment financing (tifs) and tax allocation bonds (tabs)