Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Home Re 2021-2 Ltd.

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Home Re 2021-2 Ltd. – At a glance:

  • Issuer: Home Re 2021-2 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: $398.4m
  • Trigger type: Indemnity
  • Ratings: Moody's rated (details below)
  • Date of issue: Aug 2021

Home Re 2021-2 Ltd. – Full details:

This is the second mortgage insurance-linked securities (ILS) transaction from MGIC Investment Corporation on behalf of its Mortgage Guaranty Insurance Corporation entity of 2021.

MGIC is seeking to expand its capital markets backed and collateralized mortgage reinsurance with this latest mortgage ILS deal, which will be the insurers fourth such transaction.

A new Bermuda-based special purpose insurer (SPI), Home Re 2021-2 Ltd. (HMIR 2021-2), has been registered for this issuance of roughly $398.4 million of mortgage insurance linked notes

As a result, this looks like it will be MGIC’s second-largest mortgage ILS deal yet, but only very slightly as its last transaction issued earlier this year (which was its largest) was approximately $399 million in size.

Each class will be sold to capital market investors, with the resulting collateral used to underpin excess-of-loss mortgage reinsurance arrangements between the SPI and the sponsor of the deal, Mortgage Guaranty Insurance Corporation.

As a result, the transaction transfers the credit risk associated with mortgage insurance policies on a defined portfolio of mortgages to the capital markets for MGIC.

Covered mortgage loans have an effective date from January 1st 2021 to May 28th 2021, with the pool made up of 181,727 mortgage loans with a total insured loan balance of roughly $52 billion.

Rating agency Moody’s said that the insured pool consists of high-quality mortgage loans and that the notes offered have a 12.5 year maturity and a sequential pay structure.

The roughly $398.4 million of mortgage insurance-linked notes are split across five tranches being offered to investors, with Moody’s having rated four of them.

The transaction breaks down as follows, including ratings from Moody’s:

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  • $67.9m Class M-1A notes, rated Baa2 (sf), paying SOFR +125 bps.
  • $108.7m Class M-1B notes, rated Baa3 (sf), paying SOFR +160 bps.
  • $126.8m Class M-1C notes, rated Ba3 (sf), paying SOFR +280 bps.
  • $72.4m Class M-2 notes, rated B3 (sf), paying SOFR +325 bps.
  • $22.6m Class B-1 notes, unrated, paying SOFR +415 bps.
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