NLC Sponsors New Mutual Bond Insurer

July 27, 2012

Cynthia Cusick

With the endorsement of NLC, Build America Mutual (BAM) launched today, adding a mutual insurer to the municipal bond market. See news release at www.buildamerica.com

Ever since the economic downturn created significant hardships for cities and towns across the country, especially with financing and insuring bond issuances, NLC has been working to bring an insurance solution to the marketplace that would benefit municipalities. 

“NLC is pleased to endorse BAM because BAM is uniquely situated to provide cities and towns not only access to municipal bond insurance that will facilitate their financing and reduce their costs, but also the unique benefits of membership in a mutual insurance company,” said NLC Executive Director Donald J. Borut. 

In the fall of 2008, NLC organized a Blue Ribbon Commission on Municipal Credit Enhancement to assess the municipal bond market and its impact on municipal issuers, and make recommendations to improve the availability and affordability of bond insurance. The 17-member commission consisted of issuer representatives, bond lawyers, underwriters, financial advisers, academics, rating agency staff, retirement system staff, and bond insurance professionals. One of the commission’s recommendations was to investigate the feasibility of creating a mutual insurance company. 

While ultimately NLC decided against forming it's own insurance company, the commission's recomendations will be met because BAM brings a public-private partnership mutual model and ensures that municipalities will continue to have access to long-term financing and choice in the marketplace. BAM also adds value and additional competition to the municipal financing market and provides cities, especially smaller cities that have had difficulty obtaining long-term financing, access to affordable bond rates. 

The mutual model includes voting rights and the receipt of future dividends when declared by BAM’s Board of Directors. 

BAM’s underwriting activities are limited to guaranteeing bonds of fixed rate, fully amortizing debt. Its insurance is extended only to U.S. essential, public purpose municipal bonds. BAM is actively considering transactions for its guaranty to be priced in September 2012. 

Details: For more information, visit the NLC web page for Build America Mutual.