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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.
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Monoline Insurance Company
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A business that focuses on operating in one specific financial area. The main advantage of monolines is that these companies have specialized skills and provide expertise beyond what can usually be expected from companies that businesses are spread across many different financial areas.
BREAKING DOWN 'Monoline'
For example, monoline insurers give investors and issuers the confidence to participate in the market by providing liquidity and financial protection. Without fully understanding the entire system and how it all comes together, a company is unable to provide its customers with quality service. Due to the expertise that monoline companies have in the industry, they are able to reduce operating cost, enhance customer service and evaluate/manage risk much more efficiently.
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