Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Eagle Re 2018-1 Ltd.

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Eagle Re 2018-1 Ltd. – At a glance:

  • Issuer: Eagle Re 2018-1 Ltd.
  • Cedent / sponsor: Radian Guaranty
  • 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: $434m
  • Trigger type: Indemnity
  • Ratings: Morningstar: M-1 - "BBB-"; M-2 - "BB-"; B-1 - "B+"
  • Date of issue: Nov 2018

Eagle Re 2018-1 Ltd. – Full details:

This is the first mortgage insurance ILS issuance to be sponsored by U.S. mortgage insurer Radian Guaranty which using a newly registered Bermuda-based special purpose insurer (SPI) for the issuance of its first mortgage insurance linked notes transaction.

The company said that its mortgage insurance linked notes offering is expected to close in November and it sees the firm looking to secure excess of loss reinsurance coverage through the issuance and sale of three tranches of notes to investors.

Newly-formed Bermuda special purpose insurer Eagle Re 2018-1 Ltd. will be the issuer of the notes for this capital markets based reinsurance transaction.

Eagle Re 2018-1 will issue three tranches of notes, each linked to the performance of its mortgage insurance book, which will be sold to investors from the capital markets and the proceeds used to collateralize reinsurance agreements between the issuer and Radian itself.

Radian Guaranty said that through the mortgage ILS transaction it expects to benefit from $410 million of excess of loss reinsurance protection from Eagle Re 2018-1 Ltd., providing cover for an existing portfolio of mortgage insurance policies that the company underwrote between January 2017 and December 2017.

The transaction will feature a $217.3 million tranche of Class M-1 notes that have been rated BBB- by Morningstar, a $168.1 million tranche of Class M-2 notes that have been rated BB- and a $24.6 million tranche of Class B-1 notes that have been rated B+.

Each tranche will fund 90% of the reinsurance coverage for the layers in question for Radian and they cover a geographically diverse pool of mortgage insurance risk, with the largest state concentration in California at approximately 12.1% of the balance.

All three tranches of notes will be exposed to the risk of mortgage insurance losses on the policies issued by ceding insurer Radian Guaranty Inc.

Update 1:

At closing the transaction upsized slightly, as Radian elected to grow the M-1 tranche to fund 100% of the reinsurance coverage required for that layer of risk, meaning the tranche grew to $241.4 million in size.

As a result the entire transaction completed at $434 million in size.

Radian also noted that it closed an excess-of-loss reinsurance agreement with a traditional reinsurer simultaneously with the mortgage ILS deal, the first time that has been achieved the company said. The XoL reinsurance sits alongside the Class M-2 and Class B-1 notes, providing the 10% of additional reinsurance funding.

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