Gallagher Re secured $140m of reinsurance for Arch’s Bellemeade program in 2020

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Global reinsurance broker Gallagher Re, part of the Gallagher group, successfully brokered $140 million of traditional mortgage reinsurance for Arch Capital during 2020, as part of the firms Bellemeade Re mortgage insurance-linked securities (ILS) program.

gallagher-re-logoArch Mortgage Insurance sponsored the issuance of over $1.55 billion of Bellemeade Re mortgage insurance-linked notes in 2020, as it continued to expand its capital market backed sources of mortgage reinsurance protection.

For the first time in 2020 though, Arch began to add some traditional mortgage reinsurance alongside these deals, with Gallagher Re acting as the reinsurance broker.

Arch’s Bellemeade Re 2020-1 Ltd. issuance in June 2020 became the first successful issuance of mortgage ILS notes after the global COVID-19 pandemic broke out earlier in the year.

Arch had first tried to issue that transaction at a much larger size than the $450 million of mortgage ILS notes it eventually issued in March, as we reported, but the capital market uncertainty and volatility caused by the pandemic led to that deal being pulled.

When the first Bellemeade Re of 2020 eventually came back to market in June, Arch also sought traditional mortgage reinsurance to sit alongside it, with the help of Gallagher Re.

It became the first mortgage ILS program to incorporate traditional mortgage reinsurance, seemingly as a way to top-up the cover from the overall issuance at a time when capital market investor appetites were not as high as prior to the pandemic.

The addition of traditional reinsurance to the program also means Arch can cover areas of its mortgage risk where the cost of capital markets capacity may not be as conducive, all under a single seamless transaction that syndicates across both traditional and alternative reinsurance markets.

Gallagher Re has now brought Arch $140 million of traditional reinsurance across four Bellemeade Re mortgage ILS deals in 2020.

In the latest deal, Gallagher Re secured $15.62 million of mortgage reinsurance for Arch Mortgage Insurance for December’s Bellemeade Re 2020-4 Ltd. issuance.

“We are extremely pleased to have once again represented Arch MI in raising the required direct reinsurance capacity for its Bellemeade program, bringing a total of over $140m traditional reinsurance capacity to these transactions over the past six months,” Freddie Scarratt, Account Executive at Gallagher Re, who managed and placed the reinsurance capacity of the transaction, commented.

“In what has undoubtedly been a testing environment, collaborative partnership has never been more important. Reinsurers continue to demonstrate their preparedness to back new mortgage indemnity transactions when presented with risk transfer experience and expertise in this highly specialist field.”

Danny Mamo, Senior Vice President of Structured Capital and Reinsurance at Arch MI, added that, “Our goal in 2020 was to explore the appetite of the traditional reinsurance market for simultaneous side-by-side participation in the Bellemeade Re program with the Capital Markets. We knew the simultaneous execution would be a novelty in the market and despite the challenges brought on by the COVID-19 pandemic, we were able to attract consistent participation from multiple reinsurers on all Bellemeade Re transactions completed in 2020. We have found yet another innovative structure to expand our relationship with the reinsurance market.”

Steve Rance, Managing Partner of Mortgage Indemnity Reinsurance at Gallagher Re, also said, “The growing relationship between Arch MI and reinsurers reinforces the importance and effectiveness of traditional reinsurance as a capital source for mortgage insurance business, both in the US and further afield. And to have raised in excess of the required reinsurance capacity – over multiple large-scale transactions and during a year when COVID-19 has created such extensive economic uncertainty – is a fantastic result.”

Details of every mortgage insurance-linked notes issuance can be found in our Deal Directory.

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