Arch MI, the private mortgage insurance subsidiary of Arch Capital, has obtained over $640 million of indemnity reinsurance from the capital markets.
The company secured coverage on a pool representing $38 billion of mortgages from Bellemeade Re 2020-3 Ltd., a special purpose reinsurer.
Arch MI explained that the reinsurance was obtained by issuing approximately $580 million in bonds and $64 million in direct reinsurance.
This transaction largely covers a portfolio of MI policies issued by Arch MI and affiliates from September through November 2020.
This Mortgage Insurance-Linked Note (MILN) transaction is Arch’s first of 2021 and the 15th Bellemeade transaction since the program’s inception in 2015.
The notes issued will all be exposed to the risk of losses Arch’s mortgage insurer entities pay to settle claims on an underlying pool of mortgage insurance policies.
Additionally, this is the first MILN to use the Secured Overnight Financing Rate (SOFR) as the benchmark rate for pricing, replacing the long-standing use of the London Inter-Bank Offered Rate (LIBOR) as the benchmark interest rate.