NMI Holdings to launch mortgage insurance-linked securities (ILS)

by Artemis on April 24, 2017

NMI Holdings, Inc. has announced today that it is to launch a new mortgage insurance-linked securities (ILS) transaction, as it looks to secure reinsurance by transferring some of the risks associated with a portfolio of mortgage insurance policies to the capital markets.

NMI Holdings wholly owned subsidiary National Mortgage Insurance Corporation is to sponsor the mortgage ILS transaction and this will be the first time it has sought fully-collateralized mortgage reinsurance coverage from capital market investors.

In fact, NMI Holdings will be only the second to utilise an ILS or catastrophe bond type structure to transfer mortgage insurance risk, following on from AIG which became the first with its Bellemeade Re Ltd. (Series 2015-1) and Bellemeade Re II Ltd. (Series 2016-1) transactions for its United Guaranty subsidiary at the time.

A filing from NMI Holdings revealed today that the “capital markets-based reinsurance transaction” will be effected using a newly-formed Bermuda special purpose insurer (SPI) which will be the issuer.

The transaction is slated to provide National Mortgage Insurance Corporation with $211.3 million of excess of loss reinsurance protection, covering an existing portfolio of mortgage insurance policies.

The Bermuda based SPI issuance vehicle will simultaneously issue $211.3 million of ILS securities which will be sold to third-party capital markets investors, providing the full collateralization for the reinsurance protection.

NMI said that this mortgage insurance-linked note offering has been launched today, so will currently be on offer to ILS funds and investors, and that the deal is expected to complete in the first week of May 2017.

At this time no further details of the transaction are available, but as soon as we have them we will add this transaction to our comprehensive catastrophe bond and insurance-linked security Deal Directory.

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