Arch gets $315m of mortgage reinsurance with Bellemeade Re 2022-1

Arch Capital has successfully secured roughly $315 million of mortgage reinsurance protection through its Bellemeade Re 2022-1 Ltd. mortgage insurance-linked notes issuance and a traditional reinsurance placement that sits alongside it.

As we explained earlier this month, Arch Capital was back in the capital markets with its latest insurance-linked securities (ILS) issuance to secure additional mortgage reinsurance, with a target of up to $317 million seen for the transaction.

In the end, Arch’s new Bermuda based special purpose insurer Bellemeade Re 2022-1 Ltd. issued roughly $282 million of mortgage ILS notes to investors, while the company secured another $33 million of additional traditional mortgage reinsurance at the same time, taking the total coverage secured to $315 million.

It’s the first issuance of mortgage insurance-linked securities (ILS) of 2022 and a smaller issuance than we have typically seen from Arch in recent years, but demonstrates the companies commitment to sourcing mortgage reinsurance through the capital markets.

The just over $315 million of indemnity reinsurance secured covers a pool of mortgage insurance risk representing approximately $6.3 billion of mortgages, the carrier explained today and the portfolio of mortgage insurance policies covered were issued by Arch Mortgage Insurance Company and affiliates between July through November 2021.

This is the eighteenth in the Bellemeade Re series of issues of mortgage insurance-linked notes (ILN’s) since 2015 and the sixteenth under Arch Capital (the first two were issued when AIG owned one of the sponsors).

Just in 2021 Arch sponsored more than $1.6 billion of mortgage insurance-linked securties (ILS) under the program, while this latest mortgage ILS issuance takes the Bellemeade Re series of issuances to more than $8 billion of reinsurance secured from the capital markets since the program began.

There was some uncertainty over just how large this issuance would be, given different funding levels were published by rating agencies. In the end the mortgage insurance-linked notes issuance came in nearer the$277 million partially funded target that we saw details of.

As a result, this was the smallest Bellemeade Re issuance so far in the series of mortgage ILS deals, perhaps reflecting the now layered protection these issuances provide to Arch, meaning it may not need to continue securing new mortgage reinsurance at quiet the same run-rate as in recent years.

Despite their amortisation, the multiple issuances secured each year means Arch has a significant amount of mortgage reinsurance in place still and so new issues from Bellemeade Re may not need to continue to be as large as we’ve seen in the past.

For this latest issuance, Bellemeade Re 2022-1 Ltd. has funded its reinsurance obligations through the issuance of five classes of amortizing notes with 10-year legal final maturities, totalling $282 million issued.

The final tranche sizes are detailed below along with their pricing:

$63,352,000 class M-1A notes with a coupon equal to one-month SOFR plus 175 basis points.
$58,284,000 class M-1B notes with a coupon equal to one-month SOFR plus 215 basis points.
$118,736,000 class M-1C notes with a coupon equal to one-month SOFR plus 370 basis points.
$29,458,000 class M-2 notes with a coupon equal to one-month SOFR plus 460 basis points.
$12,670,000 class B-1 notes with a coupon equal to one-month SOFR plus 550 basis points.

The additional $33,260,000 of mortgage reinsurance secured was placed with a panel of reinsurers.

“We are very pleased with this Bellemeade placement, which saw strong interest from both bond investors and reinsurers and provided important feedback on Arch’s primary mortgage insurance business through their participation,” explained Jim Bennison, EVP, Alternative Markets for Arch MI. “In addition to obtaining investors’ views on mortgage credit and pricing, these transactions remain an efficient source of capital and loss protection for Arch.”

You can read all about this new Bellemeade Re 2022-1 Ltd. mortgage insurance-linked securities (ILS) transaction from Arch Capital and every other mortgage ILS deal ever issued in our Artemis Deal Directory.