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Bond Insurance in El Paso and San Antonio
To understand what bond insurance is, it is first important to know what a bond is. A bond is an agreement in which a company, business, or investor loans money to an entity. They agree to borrow the money under specific terms that include a certain time period and a specific fixed or variable rate.
An issuer can take the bond a step further to protect themselves. The issuer of a bond can purchase bond insurance to guarantee scheduled payments of interest and principal on the bond to its bondholders in case the issuer defaults. Once the issuer purchases bond insurance, its credit rating is replaced with the insurer’s credit rating. Premiums are a measure of the perceived risk of failure of the issuer and are paid to the insurer in either lump sums or installments.
Being bonded gives issuers the ability to leverage business growth. With the increased stature of having the insurer’s credit rating, a business can feel safer in taking risks to improve and grow the business. This is especially true in the construction and financial industries.
A bonded business can obtain unbiased criticism from a credit professional and seek advice in underwriting projects.
Contact us today in either El Paso or San Antonio, and we can answer any questions you have about bond insurance.
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