Bellemeade Re 2021-3 Ltd.

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This is the third Mortgage Insurance-Linked Securities (ILS) transaction of 2021 from global specialist insurance and reinsurance player Arch Capital Group and the seventeenth issue of mortgage-linked notes. mortgage insurance (ILN) as part of the Bellemeade Re program since its inception.

With this latest ILS Mortgage Bellemeade Re 2021-3, Arch Capital Group is seeking a source of guaranteed reinsurance protection backed by capital market investors in the amount of approximately $ 511.5 million.

Six tranches of Mortgage Insurance Linked Notes (ILNs) are expected to be issued by newly registered Bermuda’s special purpose insurer (SPI), Bellemeade Re 2021-3 Ltd.

The ILS mortgage transaction Bellemeade Re 2021-3 Ltd. is targeting just over $ 511.5 million in stop loss reinsurance protection for Arch Capital’s mortgage insurance portfolios underwritten by its subsidiaries Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company.

The transaction will include six tranches of ILS-rated mortgage notes, each of which will be sold to capital market investors and the proceeds used to secure the necessary reinsurance arrangements between Bermuda SPI Bellemeade Re 2021-3 Ltd. and the mortgage underwriting subsidiaries of Arch.

The Notes issued will all be exposed to the risk of losses that Arch’s mortgage insurance entities pay to settle claims on an underlying pool of mortgage insurance policies.

The six mortgage insurance related note tranches will cover different layers of risk for Arch Capital, but all are relatively far apart and the company retains a significant layer of coverage before any of them become the subject of claims. against him.

Bellemeade Re 2021-3 Ltd. will seek to issue the following tranches:

  • $ 157.4 million Class A-2 Notes (rated A2 (sf) by Moody’s).
  • $ 104.9 million Class M-1A Notes (rated A2 (sf) by Moody’s; A (low) (sf) by DBRS Morningstar).
  • $ 60.3 million Class M-1B Notes (rated Baa2 (sf) by Moody’s; BBB (high) (sf) by DBRS Morningstar).
  • $ 76.1 million Class M-1C Notes (rated Baa3 (sf) by Moody’s; BBB (low) (sf) by DBRS Morningstar).
  • $ 97.1 million Class M-2 Notes (rated B1 (sf) by Moody’s; BB (low) (sf) by DBRS Morningstar).
  • $ 15.7 million Class B-1 Notes (rated by DBRS Morningstar).

Class A-2 notes are a notable feature of Arch Capital’s latest mortgage ILS deal, rating agencies explained, as this class will be blocked for principal payments until certain conditions are met, such as that the payment date being on or after April 2025, or credit boost to an A-1 coverage layer reaching at least 10.0%, or a delinquency percentage falls below a predefined level.

The insured mortgage covered portfolio consists of 93,138 fully amortizing fixed and variable rate first mortgages, DBRS Morningstar said, with all mortgage insurance policies effective January 2020 and no later than June 2021.

Moody’s also said of the matter: “We expect the aggregate capital at risk balance of this policyholder pool to experience 2.08% losses in a base scenario and 15.87% losses in the event of a loss. loss in a stress scenario Aaa. The overall balance of the principal exposure is the aggregate product of (i) the outstanding loan balance, (ii) the percentage of MI coverage of each loan and (iii) one minus the percentage of existing quota reinsurance. Almost all loans (except 54 loans) have existing quota reinsurance of 7.5% or 8.75% covered by unaffiliated third parties, hence respectively 92.5% or 91.25 %, a proportional share of the losses of these loans will be borne by this transaction. For the remainder of the loans with no existing quota reinsurance, the transaction will bear 100% of their MI losses. “


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