MGIC secures $323.5m Home Re 2026-1 mortgage ILS protection

MGIC Investment Corporation has now successfully priced and settled its latest 144A mortgage insurance-linked securities (ILS) transaction, securing the targeted just over $323.5 million of collateralized mortgage reinsurance through the Home Re 2026-1 Ltd. transaction.

MGIC returned to the capital markets earlier in January, with the first issuance of mortgage insurance-linked notes to support the reinsurance needs of its Mortgage Guaranty Insurance Corporation unit since October 2023.

The Home Re series of mortgage insurance-linked notes deals has been in effect since 2018 with this new Home Re 2026-1 now being the eighth rated issuance in the series.

MGIC uses these 144A catastrophe bond-like structures to secure mortgage reinsurance from capital market investors between 2018 and 2023 and now after a more than two year break, the company is back to add more mortgage ILS backed reinsurance protection to its business.

While these are very different instruments in terms of their risk profile and potential for correlation with broader financial markets, they are still insurance-linked and appealing to many fixed income investors that also allocate to catastrophe ILS, in offering some level of diversification to their portfolios.

Home Re 2026-1 Ltd. (HMIR 2026-1) has been established in Bermuda to be registered as a special purpose insurer (SPI) for the issuance of insurance-linked securities (ILS) linked to mortgage insurance risk.

Aon Insurance Managers (Bermuda) Ltd. is managing the structure for the sponsor MGIC.

The ceding company is Mortgage Guaranty Insurance Corporation, which will be the beneficiary of the capital markets backed reinsurance protection.

With the deal now finalised, Home Re 2026-1 Ltd. (HMIR 2026-1) has issued and settled five tranches of rated 144A mortgage insurance linked notes, that have been sold to investors and the proceeds used to collateralize reinsurance agreements for MGIC.

Across the five rated tranches, $323.5 million of notes have been issued, with all five tranches having 100% funding rates for their corresponding reinsurance coverage levels.

The notes will now provide MGIC’s mortgage insurance entity with multi-year and amortising mortgage reinsurance sourced from the capital markets and are exposed to the risk of losses the ceding insurer pays to settle claims on the underlying mortgage insurance policies, so the proceeds from the sale of the notes provides the collateral to cover that risk with reinsurance.

Details of the five tranches of mortgage insurance-linked notes being offered, which all have a 10-year term, and their corresponding Morningstar DBRS ratings can be seen below:

• $72.4 million Class M-1A – BBB (low) (sf)
• $96.6 million Class M-1B – BB (high) (sf)
• $72.4 million Class M-1C – BB (low) (sf)
• $57.9 million Class M-2 – B (high) (sf)
• $24.1 million Class B-1 – B (sf)

In credit enhancement terms, Morningstar DBRS said, “The BBB (low) (sf) credit rating reflects 5.00% of credit enhancement, provided by subordinated notes in the transaction. The BB (high) (sf), BB (low) (sf), B (high) (sf), and B (sf) credit ratings reflect 4.00%, 3.25%, 2.65%, and 2.40% of credit enhancement, respectively.”

It’s worth reiterating again that catastrophe bonds are the main focus of the data we collect, but we also have some charts on the mortgage ILS market here.

We do not include mortgage ILS in any other charts than those two that are specific to that market, and we do not include mortgage ILS in our market issuance and outstanding figures, they include 144A and private catastrophe bonds only.

You can read all about the Home Re 2026-1 Ltd. mortgage insurance-linked securities transaction and every other mortgage ILS deal by filtering our extensive Artemis Deal Directory.