Bond insurance

Weekend Reading : I read a couple of excellent articles on Berkshire Hathaway's participation as a bond insurer. An article in the NY Times (here) tracks how a phone conversation between Eric Dinallo and Berkshire's Ajit Jain paved the way for Berkshire to insure NY municipal bonds.

Ajit Jain, in a finely worded text (here), talks about how bond insurance helps bring stability to the price of bonds, offer protection to the investor in these bonds and keeps the interest rate low for bond issuers (as the bond is backed up by a AAA rated insurer).