Municipal Bond Forum
Low-rated bonds and insurance
Q
Why should one be concerned about buying a low-rated bond if it is insured by a quality insurer?
A
James A. Klotz responds:
The only time it might matter would be if there was a default by the issuer and the insurance company did not have the financial ability to meet its obligations to pay principal and interest. This has never occurred primarily because the quality insurers are well funded and have strict criteria regarding issues they insure.
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