Radnor Re 2020-1 Ltd.

Essent Guaranty has returned with a fourth mortgage insurance-linked securities (ILS) transaction and its first of 2020, as it seeks to expand on its capital markets backed sources of excess-of-loss mortgage reinsurance protection with a new $421.6 million Radnor Re 2020-1 Ltd. transaction.

A new Bermuda domiciled special purpose insurer (SPI) has been registered for the purposes of this mortgage ILS issuance, Radnor Re 2020-1 Ltd.

The SPI will issue five tranches of notes that will be sold to investors and the proceeds used to collateralize underlying excess of loss mortgage reinsurance agreements between the issuing vehicle and the sponsor Essent Guaranty.

The five tranches of notes each cover different layers of risk and in total the issuance is expected to see $421.6 million of notes issued and sold to investors.

The issuance will feature the following tranches, all with ten-year maturities:

– $84.3 million Class M-1A, rated at BBB (low) (sf) by DBRS Morningstar
– $118.8 million Class M-1B, rated at BB (high) (sf)
– $69.0 million Class M-1C, rated at BB (low) (sf)
– $111.2 million Class M-2A, rated at B (sf)
– $38.3 million Class M-2B, rated at B (low) (sf)

Each tranche of notes are exposed to are exposed to the mortgage insurance losses paid by Essetn Guaranty linked to the pool of mortgage loans.

The pool features 145,128 insured fixed- and variable-rate mortgage loans with original loan-to-value (LTV) ratios less than or equal to 100% and that have never been reported as more than 60 days delinquent. All of the subject loans were orignated on or after February 2018.

California is the largest source of loans in the risk pool, which ultimately means there is a catastrophe risk component to these loans where mortgage insurance covers delinquency due to earthquake events.

Update 1:

Essent Guaranty’s latest mortgage insurance-linked securities (ILS) transaction upsized and finally settled to provide the company with $496 million of mortgage reinsurance protection.

All of the five tranches of rated notes increased in size thanks to investor demand, while one additional unrated tranche of notes also came to light.

The final tranche sizes are below:

– $94.9 million Class M-1A, rated at BBB (low) (sf) by DBRS Morningstar
– $133.7 million Class M-1B, rated at BB (high) (sf)
– $77.6 million Class M-1C, rated at BB (low) (sf)
– $125.1 million Class M-2A, rated at B (sf)
– $43.1 million Class M-2B, rated at B (low) (sf)
– $21.6 million Class B-1 (unrated)