Insurance

policies underwritten by private insurers guaranteeing municipal bonds in the event of default. The insurance can be purchased either by the issuing government entity or the investor; it provides that bonds will be purchased from investors at par should default occur. Such insurance is available from a number of large insurance companies, but a major portion is written by the following "monoline" companies, so-called because their primary business is insuring municipal bonds: AMBAC Financial Group, Inc. (AMBAC); Capital Guaranty Insurance Company (CGIC); Connie Lee Insurance Company; Financial Guaranty Insurance Company (FGIC); Financial Security Assurance, Inc. (FSA); and Municipal Bond Investors Assurance Corporation (MBIA). Insured municipal bonds generally enjoy the highest rating resulting in greater marketability and lower cost to their issuers. From the investor's standpoint, however, their yield is typically lower than similarly rated uninsured bonds because the cost of the insurance is passed on by the issuer to the investor. Some unit investment trusts and mutual funds feature insured municipal bonds for investors willing to trade marginally lower yield for the extra degree of safety.