Swiss Re Insurance-Linked Fund Management

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Radnor Re 2023-1 Ltd.

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Radnor Re 2023-1 Ltd. – At a glance:

  • Issuer: Radnor Re 2023-1 Ltd.
  • Cedent / sponsor: Essent Guaranty
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $281.5m
  • Trigger type: Indemnity
  • Ratings: DBRS Morningstar rated (details below)
  • Date of issue: Aug 2023

Radnor Re 2023-1 Ltd. – Full details:

This $281.5 million Radnor Re 2023-1 Ltd. (RMIR 2023-1) issuance for Essent Guaranty is the first mortgage insurance linked securities (ILS) transaction since September 2022.

This will be the ninth issuance of mortgage insurance-linked notes sponsored by Essent Guaranty. You can view details of them all here.

As with other mortgage ILS, these transactions utilise the catastrophe bond structure to source capital market investor capital to fund some of the excess-of-loss mortgage reinsurance needs of major US mortgage insurers.

So, structured like a catastrophe bond, this deal sees Essent Guaranty registering a new Bermuda based special purpose insurer, in this case Radnor Re 2023-1 Ltd.

Radnor Re 2023-1 Ltd. is targeting issuance of four tranches of mortgage insurance-linked notes, that will be sold to capital market investors.

The proceeds of that sale will be used to collateralize excess-of-loss reinsurance agreements between the vehicle and sponsor Essent.

The notes can be triggered by a rise in mortgage insurance claims, so they are exposed to credit risk from mortgage delinquencies and defaults, but the securities that are issued will still be a pure insurance-linked asset.

If successful, the sale of these four tranches of notes to be issued by Radnor Re 2023-1 will see Essent securing roughly $253.2 million of, fully-collateralized and capital market investor backed, excess-of-loss mortgage reinsurance protection.

This latest mortgage ILS deal from Essent consists of:

  • $89.6 million Class M-1A (DBRS Morningstar rated BB (high) (sf)).
  • $74 million Class M-1B (DBRS Morningstar rated BB (low) (sf)).
  • $70.1 million Class M-2 (DBRS Morningstar rated B (sf)).
  • $19.5 million Class B-1 (DBRS Morningstar rated B (sf)).

The notes issued will have a 10-year term and will cover some of the insurance risk across a pool of insured mortgage loans consisting of 133,879 fully amortizing first-lien fixed- and variable-rate mortgages.

The subject mortgage policies are effective on dates between August 2022 and June 2023, and the mortgages in question have never been reported 60 or more days delinquent or in a payment forbearance plan.

Update 1:

This deal upsized from the initial $253.2 million to provide Essent with $281.5 million of fully-collateralized and capital market investor backed mortgage reinsurance protection.

All four tranches of notes issued have increased in size:

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  • $99.594 million Class M-1A (DBRS Morningstar rated BB (high) (sf)).
  • $82.274 million Class M-1B (DBRS Morningstar rated BB (low) (sf)).
  • $77.943 million Class M-2 (DBRS Morningstar rated B (sf)).
  • $21.651 million Class B-1 (DBRS Morningstar rated B (sf)).
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