What Does Monoline Insurance Company Mean?

It is a special insurance company offering guarantee to issuers in order to ameliorate their credit ratings which is calculated by credit rating agencies. Most often these companies offer such guarantees by the means of providing issuers with credit wraps.

In the beginning, the only used guarantee given by such insurance companies to issuers applied to municipal bonds. However, today many other bond types’ credits are ameliorated due to the security provided by a monoline insurance company.

A typical example for such credit amelioration would be the mortgage backed securities.

Monoline Insurance Company Explained

The main reason issuers ask for the help of a monoline insurance company is that they would either like to heighten their debt issues’ credit rating or they would like to be sure that such a debt issue is not undervalued or is not depreciated.

Moreover, another trick exists, namely that debt issues may get the credit ratings of the wrap provider. So in case a debt issue is guaranteed by credit wraps, then it can ‘borrow’ the rating of the securer.

Besides offering credit wraps, a monoline insurance company can also offer bonds that secure a third party against delay, insolvency or bankruptcy.