Arch Secures $374.5 Million in ILS Coverage for Mortgage Insurance
GREENSBORO, N.C. //BestWire// - Arch Capital Group Ltd. said its mortgage insurance unit secured $374.5 million of indemnity reinsurance for a portfolio of mortgage insurance policies.
The insurance-linked securities transaction was issued through from Bellemeade Re 2018-1 Ltd., a special-purpose insurer, for Arch Mortgage Insurance Co. The senior notes cover mortgage insurance policies issued by Arch Mortgage Insurance mainly from July through December of 2017, Arch said in a statement.
Bellemeade Re 2018-1 is funding its reinsurance obligations through three classes of amortizing notes with 10-year legal final maturities. The ILS transaction provides Arch with fully collateralized coverage from Bellemeade Re 2018-1 for potential losses on a portion of its 2017 mortgage insurance portfolio, the company said.
“Executing transactions like this on a programmatic basis is a critical part of running a sustainable mortgage guaranty business,” said Andrew Rippert, chief executive officer of Arch’s Global Mortgage Group, in a statement. He added the transaction gives the mortgage insurer catastrophic risk protection as well as “timely feedback from unbiased third parties on how they view the risk in the U.S. mortgage market.”
Arch said this transaction is the second time Arch Mortgage Insurance accessed the capital markets for a risk transfer involving a mortgage insurance portfolio. United Guaranty, acquired by Arch from American International Group in 2016, had conducted two similar transactions through Bellemeade Re Ltd. special-purpose vehicles. “Altogether, the four Bellemeade transactions have garnered over $1.3 billion of reinsurance protection for loans representing over $117 billion of unpaid principal balance, the company said.
Arch Mortgage Insurance is Arch Capital’s U.S. mortgage insurance operation and a provider of private insurance covering mortgage credit risk.
Arch Capital recently said it will insure U.S. government-sponsored mortgage loan facilitator Freddie Mac through a risk-transfer pilot program that will transfer the risk of first-loss mortgages to a panel of insurers and reinsurers (Best’s News Service, March 16, 2018).
Underwriting entities of Arch Capital Group Ltd. have current Best’s Financial Strength Ratings of A+ (Superior).
Shares of Arch Capital Group Ltd. (NASDAQ: ACGL) were trading at $80.60 on the afternoon of April 19, up 0.14% from the previous close.
(By David Pilla, news editor, BestWeek: David.Pilla@ambest.com)