Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Home Re 2022-1 Ltd.

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Home Re 2022-1 Ltd. – At a glance:

  • Issuer: Home Re 2022-1 Ltd.
  • Cedent / sponsor: MGIC Investment Corporation
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $474m
  • Trigger type: Indemnity
  • Ratings: DBRS Morningstar & Moody's rated (details below)
  • Date of issue: Apr 2022

Home Re 2022-1 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 of 2022.

MGIC is seeking to expand its capital markets backed and collateralized mortgage reinsurance with this latest mortgage ILS deal, which will be the insurers sixth Home Re mortgage insurance-insurance linked notes issuance in total.

The company has registered a new Bermuda-based special purpose insurer (SPI), Home Re 2022-1 Ltd. (HMIR 2021-1) for this issuance of a targeted almost $474 million of mortgage insurance linked notes.

Five classes of notes are being issued, each backed by reinsurance premiums, eligible investments, and related account investment earnings, in each case relating to a pool of MI policies linked to residential loans.

The covered pool of insured mortgage loans features 218,568 fully amortizing first-lien fixed- and variable-rate mortgages, all underwritten to a full documentation standard and never reported as 60 or more days delinquent.

The mortgage insurance policies covering the loans are all effective on or after September 2019 and on or before January 2022.

The transaction will have a 12.5-year term, but amortize down over the coverage period and is subject to a call at the sponsors request.

The transaction breaks down as follows, along with each tranches rating:

  • $159.8 million Class M-1A (DBRS Morningstar rated BBB (sf); Moody’s rated Baa2 (sf))
  • $53.3 million Class M-1B (DBRS Morningstar rated BBB (low) (sf); Moody’s rated Baa3 (sf))
  • $183.5 million Class M-1C (DBRS Morningstar rated BB (low) (sf); Moody’s rated Ba2 (sf))
  • $47.4 million Class M-2 (DBRS Morningstar rated B (high) (sf); Moody’s rated B1 (sf))
  • $29.6 million Class B-1 (DBRS Morningstar rated B (high) (sf); Moody’s rated B2 (sf))

Each class of notes issued by Home Re 2022-1 (HMIR 2022-1) will be sold to capital market investors and the resulting collateral proceeds will be used to underpin excess-of-loss mortgage reinsurance arrangements between the SPI and the sponsor of the transaction, Mortgage Guaranty Insurance Corporation.

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

Update 1:

MGIC upsized this issuance by electing to fund 100% of the Class M-1C tranche, which had previously only been planned as 80% funded.

As a result, the issuance priced and settled at almost $474 million in size, making this the largest mortgage insurance-linked notes transaction so far from MGIC.

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