Swiss Re Insurance-Linked Fund Management

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Triangle Re 2021-3 Ltd.

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Triangle Re 2021-3 Ltd. – At a glance:

  • Issuer: Triangle Re 2021-3 Ltd.
  • Cedent / sponsor: Genworth Mortgage Insurance
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $372m
  • Trigger type: Indemnity
  • Ratings: Moody's rated (details below)
  • Date of issue: Sep 2021

Triangle Re 2021-3 Ltd. – Full details:

This is Genworth Financial’s fifth mortgage insurance-linked securities (ILS) transaction and its third of 2021, as the company continues to tap the capital markets for additional excess-of-loss mortgage reinsurance capacity.

Genworth rebranded its mortgage insurance operations as Enact Holdings recently.

Enact said that its Genworth Mortgage Insurance Corporation subsidiary has secured $372 million of fully collateralized excess-of-loss reinsurance protection via the issuance of insurance linked notes from Triangle Re 2021-3 Ltd.

Triangle Re 2021-3 has issued four classes of mortgage insurance-linked notes (ILNs), which each have a 12.5-year legal final maturity with a 7-year call option, and have been sold qualified institutional investors in an unregistered private offering.

The proceeds from the sale of the $372 million of notes will be used to collateralize reinsurance agreements between Triangle Re 2021-3 and Genworth’s mortgage insurance entity.

The subject business that the Triangle Re 2021-3 mortgage ILS issuance will provide reinsurance coverage on, is a portfolio of existing seasoned mortgage insurance policies underwritten from January 1, 2021 through June 30, 2021.

Enact explained how the mortgage ILS deal would benefit its capital position.

“As of June 30, 2021, Enact had a published PMIERs sufficiency ratio of 165%, representing $1.9 billion above the published PMIERs requirement. If the Triangle Re 2021-3 transaction had been effective in the second quarter of 2021, Enact’s PMIERs sufficiency ratio would have increased on a pro forma basis, without giving effect to any developments post quarter end, to 189% and $2.3 billion above the published PMIERs requirements,” the company explained.

US mortgage insurers are now placing mortgage ILS deals at the heart of their capital management arrangements, with the reinsurance they provide a vital lever in managing their PMIERs.

For Genworth (Enact), this is its sixteenth mortgage reinsurance transaction and its fifth insurance-linked notes (ILN) issuance.

The company said it highlights a “continuation of the company’s credit risk transfer program, which has generated $3.8 billion of excess of loss reinsurance coverage since the program began in 2015.”

The transaction breaks down into the tranches detailed below, with ratings from Moody’s:

  • $131.125m of Class M-1A notes, rated Baa3 (sf).
  • $139.867m of Class M-1B notes, rated Ba3 (sf).
  • $78.675m of Class M-2 notes, rated B3 (sf).
  • $21.854m Class B-1 notes, unrated.

Rating agency Moody’s explained that, “We expect this insured pool’s aggregate exposed principal balance to incur 2.52% losses in a base case scenario-mean, and 17.95% losses under a Aaa stress scenario.”

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