Bellemeade Re 2019-4 Ltd.

Bermuda headquartered insurance and reinsurance group Arch Capital is returning to the capital markets for another slice of mortgage reinsurance protection, with its fourth mortgage insurance-linked securities (ILS) transaction of 2019.

At an expected issuance size of $577.28 million of mortgage insurance-linked notes, this Bellemeade Re 2019-4 transaction is not the largest Arch Capital has sponsored to-date but it does mark the first year when the company has revisited the ILS market four times for mortgage reinsurance protection.

This latest, a Bellemeade Re 2019-4 transaction, will see Arch looking to cede $577.28 million of risk from its mortgage insurance operation to capital market and ILS investors.

Arch has established a newly registered Bermuda based special purpose insurer Bellemeade Re 2019-4 Ltd. for its latest mortgage ILS deal.

Bellemeade Re 2019-4 Ltd. has been established to issue five tranches of mortgage insurance-linked notes, each of which will be sold to institutional investors and the proceeds used to collateralize underlying mortgage reinsurance agreements between the issuer and Arch Capital itself.

The targeted issuance size is for $577.28 million across the five tranches of notes that Bellemeade Re 2019-4 will issue.

This transaction is split into $144.32 million of Class M1A notes, $144.32 million of Class M1B notes, $126.28 million of Class M1C notes, $144.32 million of Class M2 notes and $18.04 million of Class B1 notes.

The transaction will effectively transfer the risk related to private mortgage insurance (MI) in force on a reference mortgage pool sized at $29.3 billion of loans.

The investors will be exposed to the risk that Arch’s mortgage insurance units suffer higher than expected insurance claims across the covered pool of mortgage loans.

The covered loans are largely newly originated, on average seasoned by just over 6 months, which shows that Arch continues to leverage these mortgage ILS deals as supporting capital for recent mortgage insurance underwriting, rather than just a way to secure reinsurance for its legacy books of business.

All of the notes issued will be floating-rate above LIBOR and will have a 10-year legal final maturity.

Noteholders will not take any losses until an almost $6.48 billion retained coverage level A layer of the mortgage insurance pool is eroded first.