Bellemeade Re 2025-1 Ltd.

Arch Capital Group is looking to tap capital markets investors for mortgage reinsurance for the first time in more than one year. If successfully closed, this will be the first issuance of mortgage insurance-linked securities (ILS) since September 2024.

Arch Capital had originally registered the Bellemeade Re 2025-1 Ltd. issuing entity in Bermuda at the end of August and finally a BMIR 2025-1 transaction has come to light.

Bellemeade Re 2025-1 Ltd. is expected to be licensed as a restricted special purpose insurer (SPI) in Bermuda and it is aiming to issue five tranches of mortgage insurance-linked notes, with Aon Insurance Managers (Bermuda) Ltd. managing the vehicle for the sponsor.

The ceding companies are the typical two mortgage insurers of the Arch stable of companies, being Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company.

In total, $199.3 million of notes are the target issuance size, with all five tranches set to have an 80% coverage rate for their corresponding reinsurance coverage levels.

If successfully sold to investors, the notes issued by Bellemeade Re 2025-1 Ltd. will provide Arch Capital’s mortgage insurance entities with multi-year and amortising mortgage reinsurance sourced from the capital markets.

The five rated tranches of notes that Bellemeade Re 2025-1 aims to issue will be backed by reinsurance premiums, eligible investments, and related account investment earnings, relating to a pool of mortgage insurance policies linked to residential loans in each case.

The notes are exposed to the risk of losses the ceding insurer pays to settle claims on the underlying mortgage insurance policies, so the sale of the notes will provide the collateral to cover that risk with reinsurance.

The subject pool of insured mortgage loans consists of 153,074 fully amortizing first-lien fixed- and variable-rate mortgages, all underwritten to a full documentation standard, with original loan-to-value ratios in the majority less than or equal to 100.0%, and never having been reported to the ceding insurer as 60 or more days delinquent.

Rating agency Mornignstar DBRS noted that this is this is the first rated mortgage insurance-linked note transaction where the target credit enhancement (CE) is tied to PMIERs capital requirement.

The mortgage loans all have insurance policies that came into force from January 2024 to September 2025.

Details of the five tranches of mortgage insurance-linked notes being offered, which all have a 10-year term, and their corresponding Morningstar DBRS ratings can be seen below:

• $39.9 million Class M-1A – (P) BBB (low) (sf)
• $59.8 million Class M-1B – (P) BB (high) (sf)
• $42.7 million Class M-1C – (P) BB (low) (sf)
• $37.0 million Class M-2 – (P) B (high) (sf)
• $19.9 million Class B-1 – (P) B (sf)

It’s often the case that when Arch brings mortgage ILS deals to market, there is typically a traditional mortgage reinsurance purchase made alongside the issuance of these notes, to build Bellemeade Re 2025-1 into a more meaningful source of protection for Arch Capital’s mortgage insurance business.

The coverage percentages could also increase, if investor appetite allows, so the deal could increase in size before its close in just over one week, we understand.

Update 1:

Arch Capital successfully secured the targeted mortgage reinsurance from this new Bellemeade Re 2025-1 deal.

The notes were rated by Morningstar DBRS as follows: Class M-1A was BBB (low)(sf), Class M-1B was BB (high)(sf), Class M-1C was BB (low)(sf), Class M-2 was B (high)(sf) and Class B-1 was B (sf).

Size and pricing detail for the five classes of notes that were issued is below:

• $39,859,000 class M-1A notes with a coupon equal to one-month SOFR plus 1.55%.
• $59,789,000 class M-1B notes with a coupon equal to one-month SOFR plus 2.50%.
• $42,706,000 class M-1C notes with a coupon equal to one-month SOFR plus 3.25%.
• $37,012,000 class M-2 notes with a coupon equal to one-month SOFR plus 3.90%.
• $19,929,000 class B-1 notes with a coupon equal to one-month SOFR plus 5.05%.

Additionally, Arch secured a further $49,826,000 of mortgage reinsurance from a panel of reinsurers in tandem with this mortgage insurance-linked notes issuance.