Arch Mortgage Insurance Company (Arch MI), the U.S mortgage insurance arm of Arch Capital Group, has secured $653.3 million of indemnity reinsurance from the capital markets via an insurance-linked securities (ILS) transaction with Bellemeade Re 2018-2 Ltd., a special purpose insurer.
The reinsurance relates to a portfolio of mortgage insurance policies issued by Arch MI and its affiliates between April 2013 and December 2015, and marks the third time Arch MI has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio.
The deal is believed to be the largest ever mortgage ILS transaction, and brings the total reinsurance protection garnered by Bellemeade over its five completed transactions to almost $2 billion.
More information on this transaction, as well as on the previous Arch and Bellemeade ILS deals, can be found in the Deal Directory of our sister site, Artemis.
Arch also noted that, as the Bellemeade transactions have increased in dollar value, they have also received additional interest from investors, with the latest issuance featuring 26 participants, compared to just 17 for the first Bellemeade transaction in 2015.
The special purpose insurer will issue four tranches of notes with 10-year maturities, to be sold to investors in order to collateralise its reinsurance agreements with Arch MI. The senior M-1A class notes received ratings of AAA from Morningstar and A+sf from Fitch Ratings.
Andrew Rippert, Chief Executive Officer (CEO) of Arch’s Global Mortgage Group, said: “Arch has and will continue to be a leader and innovator in the insurance-linked securities space. These Bellemeade transactions provide us with flexibility in our overall mortgage insurance portfolio and allow us to effectively manage regulatory capital.”
“This particular issue is notable for its size, the vintages of the reference pool and the high ratings assigned by the agencies,” Rippert added.
This transaction also marks the second time Arch has tapped the capital markets in 2018, having secured $375 million of mortgage reinsurance via its Bellemeade Re 2018-1 deal in April.