Radian secures $353m of mortgage reinsurance with Eagle Re 2023-1 ILS

Radian Guaranty, the US mortgage insurance arm of the Radian Group, has now successfully secured $353 million of fresh reinsurance protection from the capital markets through the issuance of Eagle Re 2023-1 Ltd. mortgage insurance-linked securities (ILS), its first mortgage insurance-linked notes since 2021.

As we reported a fortnight ago, Radian had returned to the capital markets with its first securitization of mortgage insurance risk for almost two years.

Previously, Radian had secured $484 million of collateralized reinsurance for its Radian Guaranty subsidiary, with an Eagle Re 2021-2 Ltd. issuance of mortgage insurance-linked notes in November 2021.

Since then, the market for mortgage insurance-linked notes, which forms part of insurance-linked securities (ILS) given the structures are insurance-linked in nature and structured very similarly to a catastrophe bond, has been extremely quiet.

But there have now been two successful mortgage ILS issuances in 2023 and it appears capital market investor appetite for these deals is recovering.

Recently formed Bermuda based special purpose insurer Eagle Re 2023-1 Ltd. will now provide Radian Guaranty with $353 million of fully collateralized excess of loss reinsurance coverage, covering eligible mortgage insurance policies written by the company between April 1 to December 31, 2022.

The reinsurance obligations have been funded through the issuance and sale of four classes of mortgage insurance-linked notes (ILNs), which have a 10-year maturity and 5-year call option, to eligible third-party capital markets investors in an unregistered private offering.

The four tranches of mortgage insurance-linked notes and their coupon details can be seen below:

• $110,337,000 Class M-1A Notes with a coupon equal to one-month SOFR plus 200 basis points
• $145,644,000 Class M-1B Notes with a coupon equal to one-month SOFR plus 395 basis points
• $75,029,000 Class M-2 Notes with a coupon equal to one-month SOFR plus 520 basis points
• $22,067,000 Class B-1 Notes with a coupon equal to one-month SOFR plus 685 basis points

The structure of the Eagle Re 2023-1 mortgage ILS issuance sees the M-1B notes split into three sub tranches with different levels of credit enhancement, providing more optionality for investors, and investors now have the option to exchange their M-1B Notes for proportionate interests in the sub classes.

Radian said that the mortgage ILS transaction reduces its overall cost-of-capital, increases its capital efficiency and enhances return on capital as well, while transferring risk of adverse development of the reinsured business.

This is the seventh rated mortgage insurance-linked notes issuance under an Eagle Re vehicle for Radian.

You can read all about the Eagle Re 2023-1 Ltd. mortgage ILS transaction and every other mortgage ILS deal in the Artemis Deal Directory.