(Bloomberg) — Municipal bond insurers are capturing the mostmarket share since 2009 as Detroit's bankruptcy and Puerto Rico'sstruggles underscore the value of the coverage to investors in the$3.7 trillion market.

About 5.2% of the $248 billion in munis issued this year throughSeptember carried insurance, up from 3.2% in 2013 and the highestin five years, data compiled by Bloomberg show. Before thefinancial crisis cost insurers their top ratings amid losses onguarantees of subprime-mortgage debt, more than half the market hadthe backing.

The coverage has proven its worth in the past year as insuredbonds from Detroit and Puerto Rico issuers retained their valuewhile uninsured debt sank. In a sign of the revival, MBIA Inc. saidyesterday that it hired muni analyst Tom Weyl from BarclaysPlc.

"Detroit and Puerto Rico have both shown the marketplace thatthere's value in solid bond insurers," said Rick Taormina, head ofmuni strategies in New York at J.P. Morgan Asset Management, whichoversees $53 billion in local debt. "You could start to see amovement towards 10 to 15% of bonds insured over an economiccycle."

Weyl Hire

Weyl, formerly director of muni research at Barclays in NewYork, will start by year-end as managing director and head of newbusiness development at National Public Finance Guarantee Corp.,MBIA's muni-bond insurance unit in Purchase, New York.

He's the latest muni analyst to bet on an insurance revival.John Hallacy last year joined Assured Guaranty Ltd. as managingdirector of public finance after stepping down as Bank of AmericaMerrill Lynch's head of muni research.

Weyl didn't respond to a voicemail left at his Barclays officenumber. Mark Lane, a spokesman at Barclays in New York, declined tocomment.

In August, National backed its first new bond offering since2008, according to Bloomberg data. It guaranteed portions of a $1.8billion deal from the Michigan Finance Authority on behalf of theDetroit Water and Sewerage Department. Assured Guaranty MunicipalCorp. also backed some of the debt.

National Benefit

National's backing drove down yields on the Detroit bonds. Aportion due in July 2017 with National insurance priced to yield1.24%, while uninsured debt with the same maturity yielded1.49%.

Investors expected National to back new bonds after Standard& Poor's raised its rating in March to AA-, fourth-highest andone level below units of Assured and Build America Mutual AssuranceCo., the market's primary insurers.

"Events over the past year have helped to refocus the market onsome of the important benefits of Assured Guaranty bond insurance,"Robert Tucker, head of communications and investor relations in NewYork, said by e-mail. "Those benefits include greater pricestability and improved market liquidity, along with the certaintyof timely payment of debt service and our ability to work with anissuer to resolve its difficulties."

In one example, Puerto Rico general obligations with Assured'sprotection and due in July 2024 traded this week at 100 cents onthe dollar, while debt with the same maturity that doesn't haveinsurance traded Sept. 26 at 73 cents on the dollar.

Storytellers Sought

S&P said in March that insurers may double their marketshare to 8% of issuance this year. Municipal Market Advisors, aConcord, Massachusetts-based research firm, said in the same monththat 5% was a probable target.

As soon as next week, Stockton, California's public-financingauthority plans to issue $71 million of wastewater revenue debtwith insurance from Build America Mutual, offering documentsshow.

The city, which sought bankruptcy protection in 2012, hastreated enterprise securities such as the water debt as unimpaired,meaning investors will get paid in full, bond documents show.S&P rates the underlying bonds A-, seventh-highest, while theBuild America backing boosts the grade to AA, third-best.

National will probably guarantee more new bond sales, and thecompetition among three companies instead of just two will furtherboost insured volume, said Alan Schankel, a managing director atJanney Montgomery Scott LLC in Philadelphia.

"When National attracts somebody like Tom Weyl, much likeAssured brought in John Hallacy, that's part of an overall effortto get out and tell their story," he said. "For insurers, theirchallenge is marketing now. They have a good story: Stockton,Detroit and other distressed situations have seen investors benefitfrom having insurance."

–With assistance from Bert Louis in Princeton