NMI closes $367m Oaktown Re VI mortgage ILS issuance

Mortgage insurance group NMI Holdings, Inc. has completed its latest capital markets backed reinsurance deal, successfully closing its sixth mortgage insurance-linked notes transaction, a $367 million Oaktown Re VI Ltd., on target.

As we explained ten days ago, NMI Holdings was back in the insurance-linked securities (ILS) market in search of more collateralized mortgage reinsurance protection with this new deal.

It’s the sixth time NMI has sought reinsurance for its wholly owned subsidiary National Mortgage Insurance Corporation through these Oaktown Re transactions.

Details of every Oaktown Re mortgage ILS deal can be found in our extensive insurance-linked securities (ILS) Deal Directory.

NMI registered Oaktown Re VI Ltd., a Bermuda special-purpose insurer, for this issuance of five tranches of notes that are linked to the performance of its mortgage insurance book.

Now, the five tranches have been issued successfully by Oaktown Re VI Ltd. and placed with third-party investors, with the proceeds collateralizing underlying reinsurance agreements between the SPI and National Mortgage Insurance Corporation.

The mortgage insurance-linked notes issued by Oaktown Re VI Ltd. have a 12.5-year legal maturity and the deal consists of, with ratings from Moody’s:

• $88.5m, Class M-1A, SOFR +165, Assigned Baa2 (sf)
• $199.5m Class M-1B, SOFR +205, Assigned Baa3 (sf)
• $70.8m, Class M-1C, SOFR +300, Assigned Ba2 (sf)
• $66.4m, Class M-2, SOFR +395, Assigned B2 (sf)
• $22.1m, Class B-1, SOFR +550, Assigned B3 (sf)

The transaction means that subsidiary National Mortgage Insurance Corporation (National MI) will receive $367 million of fully collateralized excess of loss reinsurance protection from Oaktown Re VI.

The reinsurance covers an existing portfolio of mortgage insurance policies, which were underwritten largely between October 1, 2020 through March 31, 2021.

The excess of loss reinsurance covers aggregate losses on subject loans beginning at a 1.85% cumulative claim rate threshold and continuing up to an eventual 6.75% aggregate detachment level.

National MI said that it anticipates receiving initial PMIERs credit for the portion of coverage attaching within the current risk-based required asset charge on subject loans and additional benefit in the future if the PMIERs requirement on subject loans increases.

With the completion of this latest mortgage ILS deal, issuance of mortgage insurance-linked notes now stands at over $2.64 billion year-to-date, which compares to almost $3.9 billion or 144A property catastrophe bonds, $350 million of other cat bond structured deals, and $271 million of private cat bonds all successfully issued so far in 2021, according to Artemis data.

You can read all about this new Oaktown Re VI Ltd. mortgage ILS transaction from NMI Holdings and every other mortgage ILS deal our comprehensive catastrophe bond and insurance-linked security Deal Directory.