Radnor Re 2019-1 Ltd.

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Radnor Re 2019-1 Ltd. – At a glance:

  • Issuer: Radnor Re 2019-1 Ltd.
  • Cedent / sponsor: Essent Guaranty
  • Placement / structuring agent/s: Credit Suisse is sole bookrunner.
  • Risk modelling / calculation agents etc: N/A
  • Risks / perils covered: Mortgage insurance risks
  • Size: $473.18
  • Trigger type: Indemnity
  • Ratings: Morningstar: M-1A - A-; M-1B - BBB-; M2 - BB-; B1 - B+
  • Date of issue: Feb 2019

Radnor Re 2019-1 Ltd. – Full details:

This is Essent Guaranty’s second mortgage insurance-linked securities (ILS) transaction, as the insurer seeks to expand its capital markets backed source of excess-of-loss mortgage reinsurance protection with a new almost $44 million Radnor Re 2019-1 Ltd. transaction.

Essent Guaranty has registered a new Bermuda domiciled special purpose insurer (SPI) for its second mortgage ILS transaction, Radnor Re 2019-1 Ltd.

The SPI will seek to issue four tranches of notes that will be sold to investors from the capital markets, some of which will be the typical ILS fund manager suspects.

The proceeds from the sale of these notes will be utilised to collateralize underlying reinsurance agreements that will provide Essent with excess-of-loss coverage for its 2018 mortgage insurance book.

The coverage from the Radnor Re 2019-1 mortgage ILS transaction will protect Essent against losses on a pool of mortgage-insurance policies linked to residential loans.

None of the 183,944 covered loans included in this deal were in default as of the cut-off date for the transaction and the largest state concentration is in California, at 9.2%.

As the reference mortgage insurance policies face losses and these losses reach indemnity trigger attachment points for each tranche of notes, Essent Guaranty they benefit from reinsurance coverage afforded by the collateral backing each tranche of notes.

The balance of the insured mortgage loans covered by the subject policies is $45.04 billion, while the aggregate of the mortgage-insurance policy coverage amount is $11.27 billion.

Radnor Re 2019-1 Ltd. is offering to investors an $84.55 million Class M-1A tranche of notes, a $160.64 million Class M-1B tranche, a $177.55 million Class M-2 tranche, and a $21.14 million Class B-1 tranche of notes (all rounded).

All of the mortgage insurance-linked notes issued through this Radnor Re 2019-1 transaction are exposed to the risk of reinsured losses on the portfolio of mortgage insurance policies covered by the deal.

All four tranches of notes have 10 year maturities, with February 2029 the stated final maturity for the transaction.

Losses would eat their way up through the tranches of notes, from the B-1 layer upwards as losses under the reinsurance agreements expanded.

Update:

At issuance the the Radnor Re 2019-1 Ltd. deal grew to $473.2 million in size thanks to investor demand, an increase of 7% over its initial size.

The final tranches sizes were an $84.547 million Class M-1A tranche with an initial interest rate of one-month LIBOR plus 125 basis points, a $174.563 million Class M-1B tranche with an initial interest rate of one-month LIBOR plus 195 basis points, a $192.937 million Class M-2 tranche with an initial interest rate of one-month LIBOR plus 320 basis points and a $21.137 million Class B-1 tranche of notes with an initial interest rate of one-month LIBOR plus 445 basis points, totaling $473.184 million in size.

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