Radnor Re 2024-1 Ltd.

This targeted $326.9 million Radnor Re 2024-1 Ltd. (RMIR 2024-1) mortgage insurance-linked securities issuance for Essent Guaranty is its first sponsorship of mortgage insurance linked notes since August 2023.

This will be the tenth issuance of mortgage insurance-linked notes sponsored by Essent Guaranty, as the company continues to look to the capital markets for collateralized mortgage reinsurance protection. You can view details of them all here.

As with other mortgage ILS, these Radnor Re transactions use a 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 like Essent.

So, structured like a catastrophe bond, this deal sees Essent Guaranty registering a new Bermuda based special purpose insurer, in this case Radnor Re 2024-1 Ltd.

Radnor Re 2024-1 Ltd. is targeting issuance of five tranches of mortgage insurance-linked notes, that will be sold to capital market investors, with a target of almost $327 million.

The proceeds of the sale of the notes 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.

This latest Radnor Re 2024-1 mortgage ILS deal from Essent consists of:

• $96.2 million Class M-1A at BB (high) (sf)
• $76.9 million Class M-1B at BB (low) (sf)
• $57.7 million Class M-1C at B (high) (sf)
• $76.9million Class M-2 at B (low) (sf)
• $19.2 million Class B-1 at B (low) (sf)

We’re told there is a likelihood that this Radnor Re 2024-1 mortgage ILS deal upsizes, as investor’s are proving increasingly receptive to these arrangements again and the initial target was for 90% funding of each class of notes, but we’re told at settlement it could be higher.

Rating agency Morningstar DBRS commented, “RMIR 2024-1 is Essent Guaranty, Inc.’s (Essent Guaranty or the Ceding Insurer) 10th rated mortgage insurance-linked note (MILN) transaction. The Notes are backed by reinsurance premiums, eligible investments, and related account investment earnings, in each case relating to a pool of mortgage insurance (MI) policies linked to residential loans. The Notes are exposed to the risk arising from losses the Ceding Insurer pays to settle claims on the underlying MI policies. As of the cut-off date, the pool of insured mortgage loans consists of 120,648 fully amortizing, first-lien, fixed- and variable-rate mortgages underwritten primarily to a full documentation standard with original loan-to-value ratios (LTVs) less than or equal to 100% that have never been reported to the Ceding Insurer as 60 or more days delinquent, and have not been reported to be in a payment forbearance plan as of the cut-off date. The mortgage loans have MI policies effective on or after July 2023 and on or before July 2024.

“The BB (high) (sf) credit rating reflects 6.00% of credit enhancement, provided by subordinated notes in the transaction. The BB (low) (sf), B (high) (sf), and B (low) (sf) credit ratings reflect 5.00%, 4.25%, and 3.00% of credit enhancement, respectively.”

Update 1:

We learned that Essent Guaranty upsized this Radnor Re 2024-1 issuance of mortgage insurance-linked notes.

In the end the company saw almost $363.4 million of 144A notes issued, to supply that amount of mortgage reinsurance capital.

The updated tranche sizes and coupons are below:

• Class M-1A – $106.872m, SOFR +2.0%
• Class M-1B – $85.498m, SOFR +2.90%
• Class M-1C – $64.124m, SOFR +3.50%
• Class M-2 – $85.498m, SOFR +4.00%
• Class B-1 – $21.374m, SOFR +5.15%