Bellemeade Re 2020-4 Ltd.

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Bellemeade Re 2020-4 Ltd. – At a glance:

  • Issuer: Bellemeade Re 2020-4 Ltd.
  • Cedent / sponsor: Arch Capital Group Ltd.
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $321m
  • Trigger type: Indemnity
  • Ratings: ?
  • Date of issue: Dec 2020

Bellemeade Re 2020-4 Ltd. – Full details:

Global specialty insurance and reinsurance firm Arch Capital is back in the capital markets for its fourth mortgage insurance-linked securities (ILS) issuance of 2020.

Details are so far scarce, so we cannot be 100% certain on the size of this issuance, but it looks likely to be up to $337 million, depending on the funding level achieved for individual certain tranches.

Arch has registered a new Bermuda special purpose insurer (SPI) named Bellemeade Re 2020-4 Ltd. for the deal.

Bellemeade Re 2020-4 is marketing three tranches of notes, two rated, totalling around $337 million in size. However the overall size of the issuance may be different, depending on the funding of each level of coverage.

We also understand Arch is likely seeking traditional reinsurance to tie into the coverage provided by the Bellemeade Re 2020-4 mortgage insurance-linked notes, so could elect to purchase more coverage from the traditional market, or capital market, depending on pricing.

This issuance will feature: a roughly $142.1 million tranche of Class M-2A notes that have been rated at BB (sf) by DBRS Morningstar and rated Ba3 (sf) by Moody’s; a roughly $162.4 million tranche of Class M-2B notes rated B (low) (sf) by DBRS Morningstar; and an almost $32.5 million tranche of Class B-1 notes which are unrated.

The notes will be sold to investors and the proceeds used to collateralize reinsurance agreements between Bellemeade Re 2020-4 Ltd. and the ceding insurers which are Arch Mortgage Insurance and United Guaranty Residential Insurance, Arch Capital’s two main mortgage insurance subsidiaries.

Interestingly, rating agency DBRS Morningstar explained that the Bellemeade Re 2020-4 Notes are backed by the same pool of mortgage insurance policies that were also reinsured in the Bellemeade Re 2020-1 Ltd. transaction earlier this year.

Losses from subject policies that are reinsured in this transaction will be allocated first to the 2020-4 coverge levels and these three tranches of notes before they are then allocated to the coverage level B-1 of the Bellemeade Re 2020-1 transaction.

As a result, it seems these notes will sit beneath that earlier transaction, which was the first mortgage ILS deal to come to market successfully after the COVID-19 pandemic broke out.

Update 1:

Arch Capital completed its latest and fourth mortgage ILS issuance of 2020 with an issuance of $321 million of notes through Bellemeade Re 2020-4, adding a further almost $16 million of direct reinsurance at the same time to provide it with over $337 million of coverage.

The mortgage insurance-linked notes issuance under Bellemeade Re 2020-4 Ltd. completed as follows:

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  • $136,264,000 class M-2A notes with a coupon equal to one-month LIBOR plus 260 basis points.
  • $152,646,000 class M-2B notes with a coupon equal to one-month LIBOR plus 360 basis points.
  • $32,483,000 class B-1 notes with a coupon equal to one-month LIBOR plus 500 basis points.
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