Bond Insurance (Policy)
A financial guaranty insurance policy provided by a bond insurer which pledges to make scheduled payments of interest and principal of a bond issue in the event the issuer is unable to make those payments on time.
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Credit Enhancement
The use of the credit of an entity having greater financial strength than the Issuer or Borrower to improve the credit quality of a Bond Issue. Frequently encountered types of Credit Enhancement include Bond Insurance, Letter of Credit, other Guaranties, and government programs.
See Also
Letter of Credit
A commitment, usually issued by a commercial bank, used to guarantee payment of the payment of the principal and interest on a bond issue.
Guaranty
A third party’s promise to pay the debt service on the bonds or perform some other obligation, which is the primary obligation of another party.
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Term of the Week
Securities Act of 1933
Law designed to ensure that investors are provided with material information about new issues of securities offered for sale to the public.