Arch confirms $163m Bellemeade Re 2024-1 mortgage ILS, adds $40.8m in reinsurance

Arch Capital, via its Arch Mortgage Insurance unit, has confirmed the issuance of the almost $163.2 million in Bellemeade Re 2024-1 Ltd. mortgage insurance-linked securities that we had first reported on more than a week ago, while also saying that it purchased almost $40.8 million in traditional reinsurance alongside them.

In total, Arch Mortgage Insurance secured over $203 million in mortgage reinsurance protection and has now been successful as the first sponsor of mortgage insurance-linked notes since November 2023.

As we reported on August 5th, Arch Capital was attempting to reopen the market for mortgage insurance-linked securities (ILS) with the first issuance of mortgage insurance-linked notes seen in 2024.

The last Bellemeade Re mortgage insurance-linked notes issuance before this was in October 2023, which was Arch’s first deal in a year at that time.

As we said, mortgage insurers had shied away from the securitized markets for sourcing reinsurance during a period of capital markets volatility, while interest rates and a need to pay investors higher spreads had also been a driver of the slowdown seen.

But, as well as that, changes to rating methodologies meant that mortgage ILS deals were not delivering the capital relief previously enjoyed, which resulted in a wave of early redemptions of mortgage ILS notes and brought the market to a halt.

Now, Arch Capital has been successful with a first mortgage ILS deal for quite a while and the company is clearly pleased to be back.

“Bellemeade continues to be a key element of Arch’s risk and capital management strategy. Despite current market volatility, we are pleased with this execution,” Jennifer Weiss, VP of Structured Capital and Reinsurance for Arch MI explained.

The $203 million of indemnity reinsurance secured covers a pool representing approximately $30.5 billion of mortgages.

The reinsurance was all secured via Bellemeade Re 2024-1 Ltd., the special purpose reinsurer, with the coverage obtained by issuing the approximately $163 million in bonds and $41 million in direct reinsurance secured from a panel of reinsurers, Arch said.

Since the Bellemeade program began in 2015, Arch has completed 21 transactions that have secured over $9.7 billion in indemnity reinsurance.

You can read about every one by filtering our extensive Deal Directory to view only mortgage ILS transactions.

The company disclosed the pricing details for the notes, seen below:

$34,964,000 class M-1A notes with a coupon equal to one-month SOFR plus 2.15%.
$53,612,000 class M-1B notes with a coupon equal to one-month SOFR plus 3.20%.
$37,294,000 class M-1C notes with a coupon equal to one-month SOFR plus 3.95%.
$25,640,000 class M-2 notes with a coupon equal to one-month SOFR plus 4.60%.
$11,654,000 class B-1 notes with a coupon equal to one-month SOFR plus 5.55%.

You can read all about this Bellemeade Re 2024-1 Ltd. mortgage insurance-linked securities transaction and every other mortgage ILS deal by filtering our extensive Artemis Deal Directory.