Definition for : Monoline insurance company

A "Monoline Insurance company" (also called "Monoline") is an Insurance company which specialises in providing its own (high) corporate Rating to a Bond issue with a lower underlying Rating, by effectively guaranteeing (also called "wrapping") the payment of all Principal on the last Maturity date, and all interests when due. This mechanism is extensively used in the US municipal Bond Market, as well as in the Securitisation Market. While the monolines, such as MBIA, AMBAC or FSA used to be rated AAA/Aaa/AAA by Standard & Poor's, Moody's and Fitch, they were downgraded in the financial crisis triggered by the Sub-prime crisis in mid 2007.
(See Chapter 21 Other debt products of the Vernimmen)
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