Arch’s new Bellemeade Re issue closes at $508m, plus $131.5m of reinsurance

Arch Capital Group, the Bermuda headquartered specialty insurance and reinsurance company, eventually secured close to $508 million of mortgage reinsurance through its latest Bellemeade Re 2021-3 Ltd. mortgage ILS transaction, but added another $131.5 million of reinsurance from the traditional market at the same time.

As we explained over a week ago, Arch Capital was back in the market with its third mortgage insurance-linked securities (ILS) deal of 2021.

Arch is the most prolific sponsor of mortgage insurance-linked notes (ILN’s) or mortgage ILS’, to source reinsurance capacity from the capital market, having visited the market at least once since 2017.

This new Bellemeade Re mortgage ILS is the insurers fifteenth directly sponsored transaction and the seventeenth in the Bellemeade Re series of issues of mortgage insurance-linked notes (ILN’s).

When we covered the deal earlier this month, we’d seen preliminary sales documents suggesting Arch Capital was aiming to secure roughly $511 million of mortgage reinsurance through an issuance of notes by a newly registered Bermuda special purpose insurer (SPI), Bellemeade Re 2021-3 Ltd.

There were some adjustments to tranche sizes through the marketing of the deal and eventually Arch Capital secured almost $508 million of reinsurance through the transaction.

In total, Arch said today that it secured more than $639 million of indemnity reinsurance protection, covering a pool representing approximately $28.7 billion of mortgages , using the Bellemeade Re 2021-3 Ltd. vehicle.

Bellemeade Re 2021-3 Ltd. funded its reinsurance obligations through the issuance of six classes of amortizing notes with 10-year legal final maturities.

The final mortgage ILS transaction arranged breaks down as follows:

• $122,961,000 class of A2 notes with a coupon equal to one-month SOFR plus 100 basis points.
• $104,926,000 class M-1A notes with a coupon equal to one-month SOFR plus 100 basis points.
• $64,329,000 class M-1B notes with a coupon equal to one-month SOFR plus 140 basis points.
• $81,397,000 class M-1C notes with a coupon equal to one-month SOFR plus 155 basis points.
• $115,524,000 class M-2 notes with a coupon equal to one-month SOFR plus 315 basis points.
• $19,005,000 class B-1 notes with a coupon equal to one-month SOFR plus 385 basis points.

On top of this, another $131,518,000 was placed with a panel of reinsurance companies, Arch explained.

“The introduction of an A2 class is the latest structural refinement in the Bellemeade program intended to better optimize capital in support of Arch’s mortgage insurance business,” explained Jim Bennison, EVP, Alternative Markets for Arch MI. “The closing of this transaction brings total protection procured through the Bellemeade program to $1.9 billion year to date, which is both a testament to the strength of the Bellemeade franchise and the market’s interest in the mortgage credit risk originated by Arch.”

Including this latest Bellemeade Re 2021-3 transaction, Arch Capital will have secured almost $7.4 billion of reinsurance through its mortgage ILS deals.

Including the two additional Bellemeade program ILS deals from when AIG was the ultimate beneficiary, as owner of United Guaranty which Arch later acquired, takes the total to almost $8 billion of mortgage reinsurance coverage secured from the capital markets through ILS issues.

You can read all about this new Bellemeade Re 2021-3 Ltd. mortgage insurance-linked securities (ILS) transaction from Arch Capital and every other mortgage ILS deal ever issued in our Artemis Deal Directory.