Arch Mortgage Insurance signs $341.7m ILS with Bellemeade Re

Arch Mortgage Insurance Company (Arch MI) has confirmed $341.7 million in indemnity reinsurance from special purpose reinsurer Bellemeade Re in an insurance-linked security (ILS) deal.

The transaction secures collateralized coverage for Arch MI on potential losses on a pool representing nearly $23 billion of mortgages in its portfolio. More than 70 percent of the policies covered in the transaction were issued before 2009, during the financial crisis.

Jim Bennison, EVP, Alternative Markets for Arch Capital Group US, said: “This subject portfolio is unique in that it contains policies covering loans originated during the crisis, some of which have been modified.

“Those policies, plus the pre- and post-crisis collateral in the pool, resulted in a transaction that was very appealing to investors and demonstrates Arch’s continued efforts to creatively manage capital and risk positions in our mortgage business.”

The ILS deal is Arch’s first in 2019 following three previous issuances conducted with Bellemeade worth $1.5 billion of reinsurance protection for loans representing more than $136 billion of unpaid principal balance in 2018. The latest agreement is notable because almost half the covered mortgages have been modified under GSE or servicer modification programs.

Bellemeade Re is funding its reinsurance obligations through the issuance of four classes of amortizing notes with 10-year legal final maturities.