What is a 'Monoline Insurance Company'

A monoline insurance company is an insurance company that provides guarantees to issuers, often in the form of credit wraps, that enhance the credit of the issuer. These insurance companies first began providing wraps for municipal bond issues, but now provide credit enhancement for other types of bonds, such as mortgage backed securities and collateralized debt obligations.

BREAKING DOWN 'Monoline Insurance Company'

Issuers will often go to monoline insurance companies to either boost the rating of one of their debt issues or to ensure that a debt issue does not become downgraded. The ratings of debt issues that are securitized by credit wraps often reflect the wrap provider's credit rating.

Along with providing credit wraps, monoline insurance companies also provide bonds that protect against default in transactions that deal with physical goods.

RELATED TERMS
  1. Monoline

    A business that focuses on operating in one specific financial ...
  2. Wrap Account

    An account in which a brokerage manages an investor's portfolio ...
  3. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
  4. Bond Insurance

    A type of insurance policy that a bond issuer purchases that ...
  5. Credit Enhancement

    A method whereby a company attempts to improve its debt or credit ...
  6. Wrap Fee

    A comprehensive charge levied by an investment manager or investment ...
Related Articles
  1. Investing

    Fatal Seduction Of The Municipal Bond Insurers

    Learn how a foray into CDOs and other exotic products ruined an industry's image.
  2. Retirement

    The Rap On Wrap Fees For Retirement Accounts

    If your retirement account is managed under a wrap fee program, you need to consider whether you should pay the fee out of your retirement account balance or out-of-pocket.
  3. Investing

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  4. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  5. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  6. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  7. Personal Finance

    Should Your Credit Rating Scare You?

    Take the mystery out of credit scores by learning the most important ways it can impact your life.
RELATED FAQS
  1. Who or what is backing municipal bonds?

    Learn about the basics of municipal bonds, including the various revenue sources that are utilized to back or secure municipal ... Read Answer >>
  2. Does a good credit rating guarantee repayment?

    Learn how credit ratings help investors determine the creditworthiness of an issuer and the risk associated with making an ... Read Answer >>
  3. How long are credit ratings valid?

    Learn how credit ratings are issued and how long they are valid. Investors look to credit ratings to determine risk associated ... Read Answer >>
  4. Can companies insure their accounts receivable?

    Understand what credit insurance is and how it protects companies against payment problems they may encounter in trying to ... Read Answer >>
  5. Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers ... Read Answer >>
Hot Definitions
  1. Tender Offer

    An offer to purchase some or all of shareholders' shares in a corporation. The price offered is usually at a premium to the ...
  2. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
  3. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  4. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  5. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  6. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
Trading Center