YOU ASK:

What is the definition of Financial Guarantee Insurance?

WE ANSWER:

Financial Guarantee Insurance provides protection so that the investor will receive the principal and the interest in case there is a default. This is applicable to financial transactions that involve debt instruments such as municipal bonds. In short, this is insurance to protect lenders in case a borrower fails to repay the loan on time.

Sometimes, it is those who sell debt instruments and asset-backed securities themselves who buy financial guarantee insurance in an effort to improve their credit rating and marketability.

This kind of insurance may also protect the insured from losses brought about by the decrease in interest rates.

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