The first municipal bond insurance company was created in 1971 as a supplementary of MGIC Investment Corp. of Milwaukee; now usually called as Ambac Financial Group, Inc. The American Municipal Bond Assurance Corporation assures new municipal bond offerings globally and is one of the foremost firms in its field. A municipal bond issuer may buy insurance coverage so as to raise investor confidence that principal and interest payments will be done in full and on time if the issuer fails to pay.

Due to extra confidence developed by this coverage, insured bonds can be priced higher, have lower interest rates and can be more liquid. Also, bonds insured by companies like the Ambac Financial Group in general take on the credit rating of their insurance companies, increasing investor confidence even more.