Essent Guaranty has returned with its fourth mortgage insurance-linked securities (ILS) transaction and its first of 2020, as it seeks to expand on its capital markets backed sources of excess-of-loss mortgage reinsurance protection with a new $421.6 million Radnor Re 2020-1 Ltd. transaction.
Essent’s new transaction was actually the first mortgage insurance-linked notes arrangement of 2020, coming to market just slightly before a new mortgage ILS deal from Radian Group that we covered yesterday.
A new Bermuda domiciled special purpose insurer (SPI) has been registered for the purposes of this mortgage ILS issuance, Radnor Re 2020-2 Ltd.
The SPI will issue five tranches of notes that will be sold to investors and the proceeds used to collateralize underlying excess of loss mortgage reinsurance agreements between the issuing vehicle and the sponsor Essent Guaranty.
The five tranches of notes each cover different layers of risk and in total the issuance is expected to see $421.6 million of notes issued and sold to investors.
The issuance will feature the following tranches, all with ten-year maturities:
– $84.3 million Class M-1A, rated at BBB (low) (sf) by DBRS Morningstar
– $118.8 million Class M-1B, rated at BB (high) (sf)
– $69.0 million Class M-1C, rated at BB (low) (sf)
– $111.2 million Class M-2A, rated at B (sf)
– $38.3 million Class M-2B, rated at B (low) (sf)
Each tranche of notes are exposed to are exposed to the mortgage insurance losses paid by Essetn Guaranty linked to the pool of mortgage loans.
The pool features 145,128 insured fixed- and variable-rate mortgage loans with original loan-to-value (LTV) ratios less than or equal to 100% and that have never been reported as more than 60 days delinquent. All of the subject loans were orignated on or after February 2018.
California is the largest source of loans in the risk pool, which ultimately means there is a catastrophe risk component to these loans where mortgage insurance covers delinquency due to earthquake events.
Since Essent has been leveraging the catastrophe bond or ILS structure as a way to source mortgage reinsurance capital, the execution and pricing of transactions backed by capital market investors has been attractive. As a result its no surprise to see the firm return again for another mortgage ILS issuance, adding to its fully collateralized reinsurance protection.
Mortgage insurance-linked notes, or mortgage insurance-linked securities (ILS), are now a component of insurers mortgage reinsurance programs that are growing in importance, enabling them to access efficient capital that is helping to fuel the growth of their portfolios.
We will update you should any further information emerge about this deal.