Genworth Mortgage Insurance, a mortgage insurance subsidiary of Genworth Financial, has returned to the capital markets to add more mortgage reinsurance protection, with its third and now largest mortgage insurance-linked securities (ILS), a $495 million Triangle Re 2021-1 Ltd. issuance.
Genworth first sourced mortgage reinsurance capacity from the capital markets on a securitized and fully-collateralized basis in November 2019, successfully sponsoring its first mortgage ILS, a $302.8 million Triangle Re 2019-1 Ltd. transaction.
The insurer then returned in October 2020 with a larger, second mortgage ILS deal, the $350 million Triangle Re 2020-1 Ltd.
For its third mortgage insurance-linked security (ILS) issuance, Genworth has increased its appetite for capital markets backed reinsurance considerably, securing $495 million of protection with this Triangle Re 2021-1 transaction.
Mortgage insurance-linked notes (ILN’s) are an increasingly integral part of the capital stacks of leading US mortgage insurers, providing access to efficient reinsurance capacity from capital market investors, supporting 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. By opening up the capital markets to mortgage insurance risk, these insurers are benefiting from similar capital efficiencies to P&C carriers sponsoring cat bonds for reinsurance.
This issuance has been made out of Bermuda again, with Triangle Re 2021-1 Ltd. being a newly established special purpose insurer domiciled on the island.
Triangle Re 2021-1 Ltd. has issued five tranches of mortgage insurance-linked notes (ILNs), each of which have 12.5-year legal final maturities, which is the longest tenured mortgage ILS notes we’ve reported on to-date.
The notes provide collateral to support a percentage of a layer of risk in Genworth’s reinsurance tower, with the almost $495 million of notes having been sold to capital market investors and the proceeds used to collateralize underlying excess of loss reinsurance agreements between Triangle Re 2021-1 and sponsor Genworth.
Each tranche of notes are exposed to the risk of losses the ceding insurer pays to settle claims on an underlying portfolio of mortgage insurance policies.
The five tranches of notes issued by Triangle Re 2021-1 Ltd. are detailed below, along with DBRS Morningstar ratings for the four rated tranches of the transaction:
– $120.2 million Class M-1A at BBB (low) (sf)
– $141.4 million Class M-1B at BB (sf)
– $91.9 million Class M-1C at B (high) (sf)
– $99 million Class M-2 at B (low) (sf)
– $42.4 million Class B-1 (unrated)
Genworth’s latest mortgage ILS transaction is backed by seasoned insured mortgage loans that have never been reported as 60 or more days delinquent since origination and all mortgage insurance policies were effective on or after January 2014. As of the cut-off date, these loans have not been reported to be in a payment forbearance plan.
Use of the capital markets as a source of mortgage reinsurance protection continues to accelerate and the continued activity in this market, even after COVID-19, demonstrates ongoing, robust appetite from investors to allocate to mortgage insurance related risk.