Bermudian headquartered global insurance and reinsurance firm Arch Capital Group has added some new geographic diversification to its mortgage insurance book, entering into a EUR 3 billion transaction with ING featuring German mortgage loan risk.
Arch Mortgage Insurance Company (Arch MI) said that it entered into the agreement through its Dublin, Ireland domiciled Arch Mortgage Insurance dac entity.
The company said it has completed a capital relief transaction covering a €3 billion slice of a residential mortgage loan portfolio of ING DiBa A.G., a wholly owned subsidiary of ING Bank N.V.
The company said that the transaction is the “first of its kind” in the European mortgage market, providing a valuable new tool for financial institutions to help in managing their regulatory capital.
“Arch is delighted to complete a transaction that supports mortgage lending in Germany,” commented Beau Franklin, President and Chief Executive Officer of Arch’s International Mortgage Group. “Arch is committed to bringing innovative products to market and taking a leadership role in providing capital relief solutions on residential mortgage loans globally.”
Arch has been prolific in the United States mortgage insurance market, quickly becoming the largest insurer of residential mortgage risk and as a result tapping into reinsurance capital sources to support the growing risk portfolio, including through the capital markets using insurance-linked securities (ILS).
Adding global diversification to the mortgage insurance book will help Arch itself to better manage its capital efficiencies and could help it in optimising its use of reinsurance as well.
With global mortgage insurance an ambition, the firm looks set to grow the contribution that mortgage insurance underwriting makes to its results significantly over time.