Arch strikes $368m indemnity ILS reinsurance deal

Bermuda-based Arch Capital Group said on Oct. 25 that its mortgage insurance (MI) business obtained $368 million of indemnity reinsurance from Bellemeade Re 2017-1, a special purpose insurer.

The reinsurance is for a portfolio of MI policies issued by Arch MI from January through June of 2017. The transaction marks the first time that Arch’s Mortgage Group has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio, as well as the first time any mortgage insurance-linked note in the industry has been rated. The senior M-1 class note has received a rating of BBB from Morningstar.

Bellemeade Re 2017-1 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 2017-1 for potential losses on a portion of its 2017 MI portfolio.

Andrew Rippert, CEO of Arch’s Global Mortgage Group said, “Transactions like this provide us with valuable feedback from third parties on the risk and capital management aspects of our business.

“This ILS transaction demonstrates our commitment to building a sustainable mortgage guaranty business model that can last through multiple housing cycles and positions Arch as the industry leader in proactively managing residential mortgage credit risk,” Rippert added.

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