Swiss Re Insurance-Linked Fund Management

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Bellemeade Re II Ltd. (Series 2016-1)

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Bellemeade Re II Ltd. (Series 2016-1) – At a glance:

  • Issuer: Bellemeade Re II Ltd. (Series 2016-1)
  • Cedent / sponsor: United Guaranty (AIG)
  • 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: $298.6m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: May 2016

Bellemeade Re II Ltd. (Series 2016-1) – Full details:

This is the second mortgage insurance ILS issuance from AIG’s United Guaranty.

Issued through new Bermuda domiciled special purpose insurer (SPI) Bellemeade Re II Ltd., this transaction features risks from United Guaranty’s pre-2008 mortgage insurance portfolio, making it the first legacy mortgage insurance ILS transaction.

AIG said that the deal saw its mortgage insurance subsidiary United Guaranty Corporation (UGC) secure $298.6m of indemnity reinsurance protection from Bellemeade Re II for a portfolio of mortgage insurance (MI) policies issued in 2008 and prior years.

Three classes of notes have been issued and listed on the Bermuda Stock Exchange (BSX), with the proceeds from the sale of the notes used to collateralize Bellemeade Re II’s reinsurance obligations with the insurer.

The three classes of amortizing notes all have final maturities set in 10-years time, providing United Guaranty with a source of fully collateralized indemnity reinsurance cover for potential losses on a portion of its legacy (2008 and earlier) first-lien U.S. mortgage insurance policies.

The three tranches of Series 2016-1 notes issued by Bellemeade Re II consist of $16.6m Class B-1, a $107.8m Class M-2A and $174.2m Class M-2B offerings. No details of different attachment points or other factors are currently available, but it’s safe to assume each class of notes cover a different risk layer for United Guaranty.

The three classes of notes will have provided ILS and other capital market investors with a variety of potential returns, dependent on risk levels, likely helping to generate interest in the deal from a more diverse group of backers.

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