Bond insurance, also known as "financial guaranty insurance", is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or security. It is a form of "credit enhancement" that generally results in the rating of the insured security being the higher of (i) the claims-paying rating of the insurer or (ii) the rating the bond would have without insurance (also known as the "underlying" or "shadow" rating). The insurer is paid a premium by the issuer or owner of the security to be insured. The premium may be paid as a lump sum or in installments. The premium charged for insurance on a bond is a measure of the perceived risk of failure of the issuer. It can also be a function of the interest savings realized by an issuer from employing bond insurance or the increased value of the security realized by an owner who purchased bond insurance. Bond insurers are "monoline" by statute, which means that companies that write bond insurance do not participate in other lines of insurance such as life, health, or property and casualty. The term monoline does not mean that insurers operate only in one securities market, such as municipal bonds, as the term has sometimes been misconstrued. Although bond insurers are not the only monoline insurers, they are sometimes colloquially called "the monolines". Bonds insured by these companies are sometimes said to be "wrapped" by the insurer. Bond insurers generally insure only securities that have underlying or "shadow" ratings in the investment grade category, with unenhanced ratings ranging from "triple-B" to "triple-A". Benefits Value to issuers The economic value of bond insurance to the governmental unit, agency, or other issuer of the insured bonds or other securities is the result of the savings on interest costs, which reflects the difference between yield payable on an insured bond and yield payable on the same bond if it was uninsured—which is generally higher. Borrowing costs are generally reduced for issuers of insured bonds because investors are prepared to accept a lower interest rate in exchange for the credit enhancement provided by the insurance. The interest savings are generally shared between the issuer (as its incentive to use the insurance) and the insurer (as its insurance premium). Since an issuer has the