NMI’s $264.55m Oaktown Re II mortgage ILS deal now priced


The new insurance-linked securities (ILS) transaction sponsored by mortgage insurance specialist NMI Holdings, Inc., which is the firms second mortgage ILS deal, a $264.55 million Oaktown Re II Ltd. transaction that we first reported on yesterday, has now been priced.

The second transaction of mortgage insurance-linked notes for the sponsor NMI Holdings and its subsidiary National Mortgage Insurance Corp, follows on from a 2017 issuance of a $211.32 million Oaktown Re Ltd. (Series 2017-1) deal.

With the Oaktown Re II Ltd. mortgage insurance-linked securities NMI is seeking another $264.55 million layer of collateralized mortgage reinsurance cover from the capital markets, using a catastrophe bond like transaction structure.

As we explained in much more detail yesterday, the Oaktown Re II Ltd. mortgage ILS deal will see three tranches of notes issued and sold to investors in a private offering, with the resulting proceeds used to collateralize excess of loss reinsurance agreements that will provide a ten-year source of cover for the National Mortgage Insurance book.

The company will receive the $264.55 million of fully collateralized excess of loss reinsurance protection from Oaktown Re II, covering losses on an existing portfolio of mortgage insurance policies that the company had underwritten between January 2017 and May 2018. 

The three tranches of notes have now been priced with no changes to the size of the offering either.

A $133,665,000 tranche of Class M-1 Notes will pay investors a coupon of 1.55%, a $116,957,000 tranche of Class M-2 Notes will pay a coupon of 2.85%, and a $13,923,000 tranche of Class B-1 Notes will pay a coupon of 4.05%, all above one-month LIBOR rates.

The transaction is expected to complete on July 25th 2018.

These mortgage insurance-linked securities transactions provide an efficient way for mortgage insurers to tap the capital markets and ILS investor appetites for new classes of risk, offering them a vehicle through which long-term and fully-collateralized mortgage reinsurance capacity can be acquired at efficient rates.

You can read all about this Oaktown Re II Ltd. mortgage insurance ILS transaction and every other ILS or cat bond in our comprehensive catastrophe bond and insurance-linked security Deal Directory.

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