Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Bellemeade Re 2017-1 Ltd.

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Bellemeade Re 2017-1 Ltd. – At a glance:

  • Issuer: Bellemeade Re 2017-1 Ltd.
  • Cedent / sponsor: Arch Capital Group Ltd.
  • Placement / structuring agent/s: Credit Suisse is structuring agent and joint bookrunner.
  • Risk modelling / calculation agents etc: N/A
  • Risks / perils covered: Mortgage insurance risks
  • Size: $368m
  • Trigger type: Indemnity
  • Ratings: Morningstar: M-1 - BBB
  • Date of issue: Oct 2017

Bellemeade Re 2017-1 Ltd. – Full details:

This is the third mortgage insurance ILS issuance in the Bellemeade seriers and the first under Arch Capital Group’s watch, after it acquired AIG’s United Guaranty that had sponsored the previous deals.

This is also the largest Bellemeade mortgage insurance ILS deal to-date, at $368 million in size.

Arch has registered a new Bermuda domiciled special purpose insurer (SPI) Bellemeade Re 2017-1 Ltd. for this mortgage ILS transaction. The SPI has issued three tranches of notes which have in turn been sold to investors to collateralize underlying reinsurance agreements to protect the Arch Mortgage Insurance book on an indemnity basis across a 10 year term.

The $368 million of reinsurance provided by this Bellemeade Re 2017-1 mortgage insurance ILS is on an indemnity trigger basis and covers a portfolio of mortgage insurance policies issued by Arch between January and June of 2017.

Previous Bellemeade ILS deals have covered legacy books of mortgage insurance business for United Guaranty, but with this new deal Arch is reinsuring its most recently underwritten portfolio.

As an indemnity reinsurance transaction, any losses borne by the capital markets investors in the Bellemeade Re 2017-1 notes will be tied to the amount of mortgage insurance losses suffered by Arch on its 2017 mortgage insurance portfolio.

This is Arch’s first ever use of ILS to securitise risks from its portfolio and the first time it has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio and the first full cat bond style issuance from the firm.

It’s also the first time that any mortgage insurance-linked security has received a rating and the senior M-1 tranche notes have been rated BBB by Morningstar. That’s also the first time we’ve seen Morningstar rate any ILS transaction.

The most senior tranche, class M-1, is $195.1 million in size, consisting of $194.24m of Rule 144A notes and $860,000 of RegS notes.

A class M-2 tranche is $154.608 million in size, consisting of $153.858m of Rule 144A notes and $750,000 of RegS notes.

The final class B-1 tranche of notes is $18.406 million in size and only consists of Rule 144A notes.

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