Genworth Mortgage Insurance, a US mortgage insurance subsidiary of Genworth Financial, is back in the capital markets with its second mortgage insurance-linked securities (ILS) deal of this year, a $303 million Triangle Re 2021-2 Ltd. issuance.
Genworth has returned to the capital markets for more collateralized mortgage reinsurance protection soon after its first issuance of the year, a $495 million Triangle Re 2021-1 Ltd. issuance that the insurer sponsored in March.
Now the insurer is back with its fourth mortgage insurance-linked securities (ILS) deal so far, with a new Bermuda based special purpose insurer Triangle Re 2021-2 Ltd. set to issue five tranches of notes to expand its capital markets backed coverage.
Mortgage insurance-linked notes (ILN’s) are an increasingly important piece 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.
Triangle Re 2021-2 Ltd. will issue five tranches of mortgage insurance-linked notes (ILNs), each of which have 12.5-year legal final maturities.
The notes provide collateral to support a percentage of a layer of risk in Genworth’s reinsurance tower, with the $303 million of notes set to be sold to capital market investors and the proceeds used to collateralize underlying excess of loss reinsurance agreements between Triangle Re 2021-2 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 to be issued by Triangle Re 2021-2 Ltd. are detailed below, along with Moody’s ratings for the four rated tranches of the transaction:
– $47.8 million Class M-1A, paying 1 month Libor + 205, rated at Baa2 (sf)
– $92.4 million Class M-1B, paying 1 month Libor + 205, rated at Baa3 (sf)
– $66.9 million Class M-1C, paying 1 month Libor + 205, rated at Ba2 (sf)
– $79.65 million Class M-2, paying 1 month Libor + 205, rated at B2 (sf)
– $15.9 million Class B-1, paying 1 month Libor + 205 (unrated)
The notes would be eroded by losses to the subject mortgage insurance business, after retained coverage layers are eroded and then beginning with the B-1 tranche and working up through the layers of the transaction.