The sewer debt is separate from the general fund.

If the city fails to make the required payments for any reason, including bankruptcy filing, the insured bondholders “are guaranteed their scheduled interest and principal payments on time and in full” under the carrier's insurance policies.

The exposure is in addition to $224 million of municipal bond exposure from the city of Stockton, Calif., bankruptcy filing.

In a statement and in a Securities and Exchange Commission filing, National says it has plenty of capital to meet these claims obligations. The company lists about $5.7 billion in claims-paying resources, $2.8 billion in statutory capital, $410 billion in profitability from its insured portfolio and $5.3 billion in its investment portfolio.

National is the U.S. public finance-only financial guarantee insurance company of MBIA.

According to the Los Angeles Times, San Bernardino is trying to come to grips with a close to $46 million budget shortfall, and found barely enough money to pay its municipal workers this month.

The paper points out that there may be even more municipal bankruptcies in the state.

As for the bond insurers, Steve Weisbart, senior vice president and chief economist for the Insurance Information Institute says insurers have had time to prepare for bankruptcies and have not been caught off-guard.

What could hurt insurers more are their investment portfolios, since carriers purchase municipal bonds as part of their financial plans.

Cities are facing financial difficulty throughout the country. In Scranton, Pa., the city cut municipal workers' wages down to minimum wage, a move that has the workers' unions in court fighting the order.