Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Radnor Re 2021-1 Ltd.

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Radnor Re 2021-1 Ltd. – At a glance:

  • Issuer: Radnor Re 2021-1 Ltd.
  • Cedent / sponsor: Essent Guaranty
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $558m
  • Trigger type: Indemnity
  • Ratings: Moody's rated (details below)
  • Date of issue: Jun 2021

Radnor Re 2021-1 Ltd. – Full details:

This is the sixth mortgage insurance-linked securities (ILS) transaction to be sponsored by specialist insurer Essent Guaranty and if successful with the five tranche offering, it will also be the insurers’ largest to-date, providing it almost $558 million of fully-collateralized and capital market investor backed mortgage reinsurance.

Essent has registered a new Bermuda domiciled special purpose insurance company (SPI) for the purposes of this mortgage ILS issuance, Radnor Re 2021-1 Ltd. (RMIR 2021-1).

Radnor Re 2021-1 Ltd. aims to issue five tranches of mortgage insurance-linked notes, which will be offered and sold to investors, with the proceeds used to collateralize underlying excess of loss mortgage reinsurance agreements between thee SPI and the sponsor Essent Guaranty.

Each class of mortgage insurance-linked notes have 12.5-year legal maturities and will be sold to eligible third party capital markets investors.

Moody’s rated four out of the five classes of notes being issued:

  • $139.5m Class M-1A notes, rated Baa3 (sf).
  • $132.5m Class M-1B notes, rated Baa3 (sf).
  • $153.4m Class M-1C notes, rated Ba3 (sf).
  • $97.6m Class M-2 notes, rated B3 (sf)
  • $34.9m Class B-1 notes (not rated).

Each tranche of notes will provide Essent Guaranty with 100% of reinsurance coverage, minus any existing quota share reinsurance through unaffiliated insurers, Moody’s explained.

Describing the subject business, Moody’s explained:

The reference pool consists of 227,086 prime, fixed- and adjustable-rate, one- to four-unit, first-lien fully-amortizing, predominantly conforming mortgage loans with a total insured loan balance of approximately $68 billion. All loans in the reference pool had a loan-to-value (LTV) ratio at origination that was greater than 80%, with a weighted average of 90.8%. The borrowers in the pool have a weighted average FICO score of 748, a weighted average debt-to-income ratio of 36.0% and a weighted average mortgage rate of 3.0%. The weighted average risk in force (MI coverage percentage net of existing reinsurance coverage) is approximately 20.4% of the reference pool unpaid principal balance. The aggregate exposed principal balance is the portion of the pool’s risk in force that is not covered by existing quota share reinsurance through unaffiliated parties.

Update 1:

At close, Essent Guaranty secured the targeted roughly $558 million of fully-collateralized mortgage reinsurance from the capital markets with this Radnor Re 2021-1 transaction.

The spreads all settled on target, at the bottom of, and below guidance, as Essent secured strong execution for its latest mortgage ILS deal.

Details of the coupons being paid to investors are below:

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  • $139.5m Class M-1A notes – SOFR +165
  • $132.5m Class M-1B notes – SOFR +170
  • $153.4m Class M-1C notes – SOFR +270
  • $97.6m Class M-2 notes – SOFR +315
  • $34.9m Class B-1 notes – SOFR +400
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