Arch’s largest Bellemeade mortgage ILS supported by 26 investors

Arch Capital Group garnered significantly more capital market investor support for its latest and largest mortgage insurance-linked securities (ILS) transaction, with 26 investors backing its $653.3 million slice of collateralized mortgage reinsurance from the Bellemeade Re 2018-2 Ltd. transaction.

The Bellemeade Re 2018-2 mortgage ILS transaction was completed this week for Bermuda-headquartered insurance and reinsurance firm Arch Capital Group, giving the firm its largest capital markets backed source of mortgage reinsurance to-date.

Including the new transaction, Arch Capital now has approximately $2 billion of reinsurance coverage from the capital markets via its five mortgage ILS transactions.

Arch Mortgage Insurance Company said yesterday that it had completed the deal and secured $653,278,000 of indemnity reinsurance coverage from special purpose insurer Bellemeade Re 2018-2 Ltd’s issuance and sale of mortgage insurance-linked notes to investors.

The reinsurance covers a portfolio of mortgage insurance policies issued by Arch and affiliates between April 2013 and December 2015 and Arch highlighted that the senior M-1A class notes received ratings of AAA from Morningstar and A+sf from Fitch Ratings.

Much more information on the transaction can be found in our Deal Directory listing for the Bellemeade Re 2018-2 transaction.

Across the now five Bellemeade transactions completed and that Arch benefits from, the firm has secured almost $2 billion of reinsurance protection for loans representing more than $192 billion of unpaid principal balance, with this transaction being the largest mortgage ILS deal to ever hit the market.

Andrew Rippert, CEO of Arch’s Global Mortgage Group commented, “Arch has and will continue to be a leader and innovator in the insurance-linked securities space. These Bellemeade transactions provide us with flexibility in our overall mortgage insurance portfolio and allow us to effectively manage regulatory capital. This particular issue is notable for its size, the vintages of the reference pool and the high ratings assigned by the agencies.”

Arch noted that as the Bellemeade mortgage ILS transactions have completed in size, the support from capital market investors has increased and broadened as well.

The first Bellemeade mortgage ILS that Arch sponsored in 2015 was backed by 17 investors, while this latest 2018-2 transaction received the support of 26 investors, a much broader and more diverse base to secure this reinsurance capital from.

The new transaction provides Arch with 10 years of mortgage reinsurance protection for a portfolio of mortgage loans that are on average seasoned by 42 months, being originated between April 1, 2013 and Dec. 31, 2015, the oldest mortgage insurance risk loans securitised in an ILS deal so far.

As we revealed yesterday, the pricing was also keen for the transaction.

Arch has been growing its mortgage book significantly and with innovative initiatives such as the arrangement with Freddie Mac set to grow its portfolio further and increase its reliance on reinsurance capital, it’s likely that the Bellemeade series of mortgage ILS will continue to be issued and potential grow further as well.

Mortgage insurance risk now makes up 8% of the outstanding catastrophe bond and related ILS market, according to Artemis’ data.

You can read all about the $653.3 million Bellemeade Re 2018-2 Ltd. mortgage insurance-linked note (ILS) transaction and every other mortgage insurance ILS deal in the Artemis Deal Directory.