​ Is NAV Protection "​Isolated Default" Insurance Ready for a Comeback? While money market mutual funds are of course not guaranteed by the Federal Deposit Insurance Corporation (​FDIC) and while every money fund goes to great lengths to tell its investors that they'​re not insured or guaranteed, there have been a number of cases of funds carrying insurance policies in the past. Some funds carried "​NAV protection" or "​isolated default" policies, which would insure against certain loss events in a portfolio. The concept withered after 9/​11, when insurance rates skyrocketed, and after the California energy crisis and default of Pacific Gas & Electric in early 2001. Now, however, we'​re hearing discussions about an eventual revival in the concept, which should heat should, as we expect, advisors holding SIV debt purchased from their funds recover their money. Fidelity Investments pioneered the concept in 1998, with the launch of its own "​captive" Bermuda insurance company. Back in its heydey, companies such as ICI Mutual, MBIA and Zurich American all offered these "​isolated default policies", and fund groups like Federated, Vanguard, UBS and USAA all had policies in place. Most of these, however, had lapsed long before 2007'​s ABCP crisis.

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