American Municipal Bond Assurance Corporation Law and Legal Definition

American Municipal Bond Assurance Corporation (AMBAC) is a subsidiary of the MGIC Investment Corporation which provides insurance policies guaranteeing the prompt payment of both principal and interest on qualified new issues of municipal bonds. Once insured by the AMBAC, bonds automatically receive an Aaa rating from the Standard & Poor's Corporation. Also, an offering with such insurance can command a higher price upon issue, depending on the extent to which the insurance policy guarantees interest and principal repayments.