Prospects for US bond insurers improve

Business volume for bond insurers in the US is expected to rise through 2015 and for the industry's risk-adjusted pricing ratios to improve. This sector is also expected to grow if interest rates start to rise.

That is the conclusion of a report by Standard & Poor’s called US Bond Insurers and the Financial Guarantee Sector Stand at a Crossroads. The rating agency believes that while the lower yield environment and the spread compression it created hurt the financial guarantee market in recent years, as interest rates rise, the opportunities in this sector will improve.

“In the near term, expansion of the insurable market with the expected rise in interest rates, combined with the disparate underwriting strategies of the bond insurers, should lead to sufficient underwriting opportunities to support each company's underwriting strategy,” the rating agency said. “In the long term, as the bond insurers continue to prove the value of their product, the demand for financial guarantees should increase and the insured penetration of the US public finance market should rise, but not to the same levels as prior to 2008.”