Swiss Re Insurance-Linked Fund Management

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Home Re 2021-1 Ltd.

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Home Re 2021-1 Ltd. – At a glance:

  • Issuer: Home Re 2021-1 Ltd.
  • Cedent / sponsor: MGIC Investment Corporation
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: N/A
  • Risks / perils covered: Mortgage insurance risks
  • Size: $399m
  • Trigger type: Indemnity
  • Ratings: Moody's rated (details below)
  • Date of issue: Feb 2021

Home Re 2021-1 Ltd. – Full details:

This is the first mortgage insurance-linked securities (ILS) transaction from MGIC Investment Corporation on behalf of its Mortgage Guaranty Insurance Corporation entity since 2019.

The company is back and seeking what we understand to be around $399 million of collateralized mortgage reinsurance protection from the capital markets with this Home Re 2021-1 Ltd. (HMIR 2021-1) transaction.

The company has established a new Bermuda-based special purpose insurer (SPI) Home Re 2021-1 Ltd. for the issuance of almost $399 million of mortgage insurance linked notes, which would make this MGIC’s largest mortgage ILS deal yet.

These notes will be sold to capital market investors and the proceeds used to collateralize reinsurance agreements between Home Re 2021-1 and Mortgage Guaranty Insurance Corporation, securing the sponsor a multi-year source of capital markets backed reinsurance capacity, by tapping into investor appetite for the growing pool of mortgage ILS issuance.

The function of these mortgage insurance linked notes transactions is the same as a catastrophe bond, being sold to investors and the proceeds used to collateralize underlying reinsurance agreement between the issuing vehicle and ceding company.

In this case, Home Re 2021-1 Ltd. will issue five tranches of 144A notes, four of which will be rated by Moody’s.

The notes will be exposed to the risk of claims payments above predetermined levels, covering levels of MGIC’s portfolio and providing reinsurance capital to support claims as they reach attachment points for each tranche.

The notes are linked to the insurance claims performance of residential mortgage loans, across a reference pool of 195,208 mortgages with a total insured loan balance of roughly $55 billion.

As with all of these mortgage ILS deals, the sponsor will bear the first loss layer, after which the notes would take losses in order of priority.

The almost $399 million Home Re 2021-1 mortgage ILS deal is structured as:

– M-1A, $75.1m, rated by Moody’s as Baa2 (sf).
– M-1B, $112.6m, rated by Moody’s as Baa3 (sf).
– M-1C, $93.85m, rated by Moody’s as Ba2 (sf).
– M-2, $93.85m, rated by Moody’s as B2 (sf).
– B-1, $23.46m, unrated.

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