Arch Mortgage Insurance Company (Arch MI), a wholly owned subsidiary of Arch Capital Group Ltd., has secured $528 million of indemnity reinsurance via a mortgage insurance-linked note (ILN) transaction and direct reinsurance.
The $528 million of mortgage reinsurance covers a pool representing around $44 billion of mortgages for Arch MI, and is linked to 163,292 loans and issued by Arch MI and affiliates primarily in H2 2019.
The mortgage reinsurance was obtained by issuing $450 million in bonds and $78.5 million in direct reinsurance. According to Arch, Bellemeade Re 2020-1 is the first mortgage credit risk transfer completed by any firm in the COVID-19 era, and Arch’s first mortgage ILN transaction of the year.
As shown by our ILS-focused sister site, Artemis’ extensive Deal Directory, Arch’s Bellemeade transactions are a common feature of annual issuance. However, Bellemeade Re 2020-1 is the first transaction to include coverage from both fixed income investors and private reinsurers.
Jim Bennison, EVP, Alternative Markets for Arch MI, commented: “We’re pleased that we were able to bring this transaction to market during this period of uncertainty related to COVID-19.
“The response from both fixed income investors and reinsurers speaks to the attractiveness of our program. This is our eleventh Bellemeade transaction and the program remains an important tool for managing the risk and capital requirements of our U.S. Mortgage Insurance business.”
The additional reinsurance was secured with the assistance of brokerage Capsicum Re, who obtained $78.5 million of indemnity reinsurance for Arch MI.
Freddie Scarratt, Account Executive at Capsicum Re, commented: “We are extremely pleased to represent Arch MI and to have succeeded in raising the required direct reinsurance capacity for its Bellemeade program.
“Despite the macroeconomic headwinds and financial market volatility of recent months, reinsurers have demonstrated their openness to new transactions and willingness to work in collaborative partnership with specialist brokers and clients on their risk transfer needs. We hope this transaction will prove to be just the start of a long relationship between Arch MI and reinsurers in providing diversified counterparty capital to Bellemeade.
“The fact that this is the first mortgage indemnity insurance-linked note (ILN) transaction since the onset of COVID-19 – and the first to incorporate direct reinsurance capacity – also underlines the importance of reinsurance as a capital source in the marketplace.”
Steve Rance, Managing Partner of Mortgage Indemnity Reinsurance at Capsicum Re, added: “This is the second large mortgage insurance placement our specialist team has placed in the US post COVID. Raising in excess of the required capacity in today’s challenging environment is an exceptional result. It is testament to both the quality of Arch MI’s mortgage book and the deep expertise and strong market relationships of our team.”