News Column

Kroll Bond Rating Agency Releases Research on How Bond Insurers Play a Key Role in Municipal Workouts

June 26, 2014

NEW YORK--(BUSINESS WIRE)-- Kroll Bond Rating Agency (KBRA) released today a research report examining the broader role of the bond insurers in municipal workouts, addressing why it has been so significant despite their dramatic reduction in market share in the municipal bond new issue market. KBRA further suggests reasons why we believe that this leadership role should continue.

KBRA also reviews the terms of the general obligation unlimited ad valorem tax bonds (“GO ULT”) settlement in Detroit Michigan’s Chapter 9 proceeding including the uncertainties that surround its eventual implementation. The general obligation limited ad valorem tax bonds (“GO LT”) settlement of Detroit is more recent and many of its terms are not yet public but its outline supports the themes we note in this report. Although not yet finalized these outcomes should be instructive concerning the capabilities that bond insurers apply to the challenges that municipal restructurings represent.

As noted in KBRA’s Financial Guaranty Rating Methodology, “Guarantors that are pro-active in addressing potential risks in the insured portfolio and who use their rights in the transaction and insurance documents to minimize losses or increase recoveries will be viewed positively.” KBRA will continue to review these developments as part of our rating and surveillance process.

It is KBRA’s view that defaults in the municipal market will continue to be idiosyncratic and will likely show loss rates that are elevated from historical experience but not systemic. For that reason KBRA believes that municipal bond investors will be more likely to consider the value of bond insurance when analyzing the prospect of unpredictable losses that could result from higher levels of uncertainty.

To view the report, please visit

About Kroll Bond Rating Agency

KBRA was established in 2010 by Jules Kroll to restore trust in credit ratings by creating new standards for assessing risk and by offering accurate, clear and transparent ratings. KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Kroll Bond Rating Agency

Paul Kwiatkoski, 646-731-2387

Managing Director


Karen Daly, 646-731-2347

Senior Managing Director


Jack Morrison, 646-731-2410


Source: Kroll Bond Rating Agency

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Source: Business Wire

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