Re/insurance policies help Freddie Mac reach $5bn milestone
Aon Risk Solutions and Aon Benfield have assisted Freddie Mac, the US mortgage guarantor, in reaching a $5 billion issuance milestone in credit risk transfer.
The milestone comes with the inception of three new re/insurance policies under Freddie Mac’s Agency Credit Insurance Structure (ACIS) programme, which represents its largest aggregate transaction to date.
The three policies together provide up to a combined maximum limit of approximately $788 million of losses on single-family loans, and transfer much of the remaining credit risk associated with three of the Structured Agency Credit Risk (STACR) debt issuances this year.
According to Aon, these transactions are transferring a significant portion of mortgage credit risk on approximately $75 billion of unpaid principal balance (UPB) on single-family mortgages.
Freddie Mac obtains policies through ACIS that transfer to insurance and reinsurance companies around the globe a portion of the credit risk associated with its STACR debt note reference pools. Freddie Mac has placed over $5 billion in re/insurance coverage through 20 ACIS transactions since the programme’s inception in 2013.
Kevin Palmer, senior vice president at Freddie Mac, said: “We could not have achieved this $5 billion ACIS milestone without the support of Aon. Their work to educate reinsurers about this evolving market is helping to bring new sources of capital into the credit risk transfer arena – that's good news for US taxpayers and investors worldwide."
Eric Andersen, chief executive officer (CEO) of Aon Benfield, added: “We are excited that our strong and long-standing relationship with Freddie Mac has allowed us to reach this important milestone. After initially generating awareness and understanding of US mortgage credit business across the re/insurance industry, we continue to work with re/insurers across the globe to assist them to develop the skills and capabilities necessary to underwrite this type of risk.
“We believe that this sector represents a key opportunity for re/insurers, especially given that growth in many traditional business lines is becoming more difficult to achieve. Those re/insurers that have made investments in the requisite talent and technology to participate have reaped the benefits of a diversified business line, and we look forward to bringing even more markets into this area in the coming months and years.”
