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. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
  2. Credit Enhancement

    A method whereby a company attempts to improve its debt or credit ...
  3. Credit Insurance

    Credit insurance is a type of life insurance policy purchased ...
  4. American Municipal Bond Assurance ...

    The first municipal bond insurance company, formed in 1971 as ...
  5. Insured Bond

    A bond with interest and principle payments insured by a third ...
  6. AAA

    The highest possible rating assigned to the bonds of an issuer ...
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. Investing

    Uncovering The ETF Wrap

    Tax benefits, low expense ratios and flexibility - discover the advantages of this managed money product.
  3. 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.
  4. Managing Wealth

    Credit (Receivables) Insurance: Does Your Business Need It?

    This type of insurance will reimburse your business if customers don’t pay their bills. It’s not cheap, but some companies shouldn’t be without it.
  5. Investing

    Find Security In Covered Bonds

    Find out about a safe investing alternative that could have prevented the subprime meltdown.
  6. Investing

    Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.
  7. Insurance

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  8. 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.
  9. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  10. Personal Finance

    Credit And Debt Management

    America is addicted to debt. Learn how to manage your credit and keep debt from ruining your life.
RELATED FAQS
  1. How important is credit rating on a fixed income security?

    Learn how credit ratings for fixed-income securities impact the yield and provide guidance for the amount of risk for the ... 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. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  5. 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 >>
Hot Definitions
  1. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  2. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  3. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  4. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
Trading Center