Arch completes significant mortgage risk transfer through Bellemeade Re

Arch Capital’s mortgage arm has completed a large reinsurance deal with Bermuda-based special purpose reinsurer Bellemeade Re 2020-4 – the latest of a serious of pioneering deals this year.

Arch Mortgage Insurance Company (Arch MI), a subsidiary of Arch Capital, obtained more than $337 million of indemnity reinsurance on a pool representing approximately $33.3 billion of mortgages from Bellemeade Re 2020-4.

The coverage was obtained by issuing approximately $321 million in bonds and $16 million in direct reinsurance. This transaction largely covers the same portfolio of MI policies as Bellemeade Re 2020-1, which were issued by Arch MI and affiliates primarily in the second half of 2019.

This Mortgage Insurance-Linked Note (MILN) transaction is Arch’s fourth of 2020. Arch was the first mortgage insurer to complete a mortgage credit risk transfer (CRT) in the COVID-19 era and, combined, the four executions have netted over $1.8 billion of indemnity reinsurance in 2020.

Bellemeade Re 2020-4 is funding its reinsurance obligations through the issuance of three classes of amortizing notes with 10-year legal final maturities amounting to some $321 million. Additionally, a total of $15.6 million was placed with a panel of reinsurers.

“Closing four of these transactions in the past six months while our economy was significantly affected by COVID-19 is an impressive accomplishment and reflects improving investor sentiment regarding mortgage credit risk," said Jim Bennison, EVP, alternative markets for Arch MI.

"It is also notable that this is the first time coverage has been placed on pool of loans with inforce Bellemeade coverage. By placing 2020-4 on the same vintage as 2020-1, we improved our capital efficiency and transferred credit risk at terms more favorable than when we restarted the MILN market in June.”