Genworth back for second mortgage ILS, $350m Triangle Re 2020-1

Genworth Mortgage Insurance, the mortgage insurer subsidiary of Genworth Financial, is back in the capital markets for its second mortgage insurance-linked securities (ILS) issuance, with a $350 million Triangle Re 2020-1 Ltd. deal.

Genworth first tapped the capital markets for mortgage reinsurance capacity in November 2019, successfully sponsoring its first mortgage ILS with a $302.8 million Triangle Re 2019-1 Ltd. transaction.

Now, the company is seeking an expanded source of capital markets backed excess of loss mortgage reinsurance with this larger second arrangement.

Mortgage insurance-linked notes (ILN’s) have become an integral part of leading mortgage insurers’ capital stacks, providing efficient reinsurance capacity from capital market investors that helps to back their growing portfolios of mortgage insurance risk.

Similar in structure to a catastrophe bond, but effectively covering mortgage credit as their main risk, the mortgage ILS market is growing steadily and by opening the capital markets these insurers are benefiting from similar capital efficiencies to P&C carriers sponsoring cat bonds for reinsurance.

Genworth has registered a new Bermuda special purpose insurer (SPI) named Triangle Re 2020-1 Ltd. for its second mortgage ILS deal.

Triangle Re 2020-1 Ltd. will issue mortgage insurance-linked notes (ILNs), each of which have 10-year legal final maturities and each being designed to cover 67% of a layer of risk in Genworth’s reinsurance tower.

The roughly $350 million of notes will be sold to capital market investors and the proceeds used to collateralize underlying excess of loss reinsurance agreements between Triangle Re 2020-1 and sponsor Genworth.

The Triangle Re 2020-1 Ltd. mortgage ILS deal will feature the following tranches of notes, along with their pre-sale sizes and preliminary ratings from Moody’s.

• $134.854 million Class M-1A notes, rated Baa3 (sf)
• $54.94 million Class M-1B notes, rated Ba2 (sf)
• $59.935 million Class M-1C notes, rated Ba2 (sf)
• $74.919 million Class M-2 notes, rated B1 (sf)
• $24.973 million Class B-1 notes, rated B2 (sf)

The subject mortgages have an insurance coverage effective date on or after January 1st 2020, through August 31st 2020 and the reference pool of insured mortgage loans consists of 221,151 loans, with a total insured loan balance of approximately $60 billion.

It’s good to see the continued use of the capital markets as a source of mortgage reinsurance protection and the continued activity in this market, even after COVID-19, demonstrates the appetite of investors for this risk.

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