Arch Capital secures $653m reinsurance from capital markets

Arch Capital Group’s US mortgage insurance operation Arch Mortgage Insurance Company has secured $653.3 million of indemnity reinsurance from Bellemeade Re 2018-2, a special purpose insurer.

The reinsurance is for a portfolio of mortgage insurance (MI) policies issued by Arch MI and affiliates between April 2013 and December 2015.

This transaction marks the third time Arch MI has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio. Altogether, five Bellemeade transactions have been completed and have garnered nearly $2 billion of reinsurance protection for loans representing more than $192 billion of unpaid principal balance. This transaction’s $653,278,000 of reinsurance protection is believed to be the largest insurance-linked security (ILS) issue backed by a portfolio of MI policies, the company said.

Arch noted that as the Bellemeade transactions have increased in dollar value, they have also received additional interest from investors. The latest issue featured 26 participants compared to 17 investors for the first Bellemeade transaction in 2015.

Bellemeade Re 2018-2 is funding its reinsurance obligations through the issuance of four classes of amortizing notes with 10-year legal final maturities. This ILS transaction provides Arch with collateralized coverage from Bellemeade Re 2018-2 Ltd. for potential losses on a portion of its MI portfolio.

“Arch has and will continue to be a leader and innovator in the insurance-linked securities space,” said Andrew Rippert, CEO of Arch’s Global Mortgage Group. “These Bellemeade transactions provide us with flexibility in our overall mortgage insurance portfolio and allow us to effectively manage regulatory capital.” Rippert added, “This particular issue is notable for its size, the vintages of the reference pool and the high ratings assigned by the agencies.”

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