Federal Guarantee Insurance Corporation

Federal Guarantee Insurance Corporation

A private company providing financial guarantee insurance for different types of transactions. For example, an insurance policy may cover a lender from liability resulting from the failure of the borrower to repay the loan. The FGIC originally provided this insurance exclusively for municipal bonds, but expanded into different transactions, such as IPOs. Clients pay the FGIC the appropriate premium in exchange for a guarantee of repayment in case of default; this increases the bond's credit rating and, usually, decreases its interest rate. The services that the FGIC provides are similar to sureties or co-signed loans.
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