A institution/town issued bonds for some sort of development.

The bond interest rate is reset at determined periods of time at an auction.  Maybe every year?

A broker sells the bonds for the town.

The broker of the bonds said they do not want them back at any interest rate what ever. ??

The insurer of the bonds was forced to pay a higher interest rate on the bonds.  Like 2 to 3 % higher than they were before the auction.

Insurer of the bonds is running out of money to meet it's requirements on it's insured policies. 

Insurer's rating is dropping from AAA to AA. 

If any of the above in correct.

What happens if an Insurer goes bankrupt?  Have they ever gone bankrupt in previous history? 

Where does this leave the buyer of the bonds?