Largest ever mortgage ILS deal priced for Arch Capital


The latest mortgage insurance linked securities (ILS) transaction to hit the market has now been priced, as Bermudian re/insurer Arch Capital Group moves closer to securing a new $653.3 million slice of collateralized mortgage reinsurance with the Bellemeade Re 2018-2 Ltd. transaction.

This new Bellemeade Re 2018-2 mortgage insurance linked notes transaction was launched earlier this month and sees Arch Capital Group looking for its largest slice of mortgage reinsurance protection from the capital markets so far.

It’s actually the largest ever of the mortgage ILS transactions, demonstrating mortgage insurers growing reliance on the capital markets and some ILS funds as sources of reinsurance capital.

The Bellemeade Re 2018-2 transaction is Arch Capital Group’s fifth mortgage insurance linked note or mortgage insurance linked securities (ILS) issuance and the largest so far.

Special purpose insurer (SPI) Bellemeade Re 2018-2 Ltd. will issue four tranches of notes to be sold to investors to collateralize reinsurance agreements between it and Arch, to cover a portion of the firms mortgage insurance portfolio.

The notes issued will provide Arch with 10 years of mortgage reinsurance protection for mortgage loans that are on average seasoned by 42 months, being originated between April 1, 2013 and Dec. 31, 2015, the oldest mortgage insurance risk loans securitised in an ILS deal so far.

The Bellemeade Re Series 2018-2 transaction sees four tranches being issued, $236.973 million of class M-1A notes, $224.164 million class M-1B notes, $160.117 million class M-1C notes and $32.024 million class B-1 notes.

The notes were successfully priced at the end of last week, with the least risky M-1A tranche priced at 0.95%, the M-1B at 1.35%, the M-1C at 1.60%, and the riskiest B-1 at 2.65%, all a spread above one month Libor rates.

The Bellemeade Re 2018-2 mortgage ILS deal is expected to settle this week, after which Arch Capital will have almost $2 billion of reinsurance coverage from the capital markets via its five transactions.

The mortgage insurance ILS and mortgage insurance-linked note market is currently roughly $2.2 billion in size and after the Arch deal completes it will be well on its way to $3 billion outstanding, but two-thirds of the market will be from the one insurer which reflects the strong growth Arch Capital has achieved in the mortgage space.

You can read all about the $653.3 million Bellemeade Re 2018-2 Ltd. mortgage insurance-linked note (ILS) transaction and every other mortgage insurance ILS deal in the Artemis Deal Directory.

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