Arch secures $375m ILS reinsurance for mortgage risk

Arch Capital Group’s US mortgage insurance operation Arch Mortgage Insurance Company (Arch MI) secured $374,460,000 of indemnity reinsurance from Bellemeade Re 2018-1, a special purpose insurer.

The reinsurance is for a portfolio of mortgage insurance policies issued by Arch MI primarily from July through December of 2017.

Bellemeade Re 2018-1 is funding its reinsurance obligations through the issuance of three classes of amortizing notes with 10-year legal final maturities. This insurance-linked securities (ILS) transaction provides Arch with fully collateralized coverage from Bellemeade Re 2018-1 for potential losses on a part of its 2017 MI portfolio.

Andrew Rippert, CEO of Arch’s Global Mortgage Group said: “Executing transactions like this on a programmatic basis is a critical part of running a sustainable mortgage guaranty business.

“Not only does it provide us with catastrophic risk protection, it also gives us timely feedback from unbiased third parties on how they view the risk in the US mortgage market,” Rippert added.

The transaction marks the second time that Arch MI has accessed the capital markets for a risk transfer involving an MI portfolio. Previously, United Guaranty, which was acquired by Arch from AIG in 2016, had conducted two similar transactions through Bellemeade Re 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.

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