Arch’s new Bellemeade Re 2021-1 mortgage ILS completes at $580m

Arch Capital Group, the Bermuda headquartered specialty insurance and reinsurance player, has completed its new Bellemeade Re 2021-1 Ltd. mortgage insurance-linked securities (ILS) issuance at a smaller size of $580 million after electing not to place one of the tranches of notes.

However, Arch secured an additional $64 million in direct reinsurance alongside this $580 million Bellemeade Re 2021-1 ILS note issuance, taking the total mortgage reinsurance secured for the company to over $643 million.

Arch returned for what is now the re/insurers fifteenth mortgage ILS under the Bellemeade Re program of deals a few weeks ago.

When we first documented this deal, Arch was seeking roughly $665 million of mortgage reinsurance from the capital markets through newly established SPI Bellemeade Re 2021-1 Ltd.

At that size, while this issuance of mortgage ILS notes would not have been Arch’s largest mortgage ILS sponsorship, it would have been the biggest issuance seen in the mortgage insurance-linked securities (ILS) market since the COVID-19 pandemic began.

But Arch pulled one tranche of notes and the Class B-2 tranche of mortgage insurance-linked notes will not be issued at this time, the company explained today.

The total mortgage reinsurance coverage of $643 million of indemnity reinsurance will sit across a mortgage insurance pool representing approximately $38 billion of mortgages, with coverage via the special purpose insurer Bellemeade Re 2021-1 Ltd., via the $580 million in bonds and $64 million in direct reinsurance.

The transaction received strong investor support.

“Closing our first Bellemeade transaction of the year with nearly 30 investors is a testament to the maturity of the program,” explained Jim Bennison, EVP, Alternative Markets for Arch MI. “As the leader in the space, it is important to demonstrate a seamless transition from LIBOR to SOFR to establish a precedent that we expect other MILN issuers to follow.”

As we explained in our first article on this mortgage ILS deal, this is the first the first to use the Secured Overnight Financing Rate (SOFR) as the benchmark rate for pricing, instead of the long-used London Inter-Bank Offered Rate (LIBOR) as the benchmark interest rate.

Now completed, the $580 million of notes issued by Bellemeade Re 2021-1 Ltd. break down like this:

• $188,782,000 class M-1A notes with a coupon equal to one-month SOFR plus 175 basis points.
• $118,203,000 class M-1B notes with a coupon equal to one-month SOFR plus 220 basis points.
• $138,583,000 class M-1C notes with a coupon equal to one-month SOFR plus 295 basis points.
• $112,021,000 class M-2 notes with a coupon equal to one-month SOFR plus 485 basis points.
• $21,324,000 class B-1 notes with a coupon equal to one-month SOFR plus 675 basis points.

You can read all about this new Bellemeade Re 2021-1 Ltd. mortgage insurance-linked securities (ILS) transaction from Arch Capital and every mortgage ILS deal ever issued in the Artemis Deal Directory.