Arch’s new Bellemeade Re ILS settles at $201m, uses reinsurance for the rest

Bermuda headquartered re/insurer Arch Capital eventually secured $201 million of capital markets backed mortgage reinsurance protection with its latest ILS issuance, the Bellemeade Re 2022-2 Ltd. deal, using traditional reinsurance to top-up the rest of the layers.

We reported a fortnight ago that Arch Capital was back in the insurance-linked securities (ILS) market with a new mortgage deal, seeking up to $358.4 million of capital markets backed mortgage reinsurance protection.

That target size would only have been achieved had the full amount of each layer been placed with capital market investors, but in the end Arch secured $201 million through an issuance of mortgage insurance-linked notes, topping it up with $157 million in direct reinsurance secured at the same time.

As a result, Arch has still secured $358 million of indemnity reinsurance across a pool representing approximately $51.7 billion of mortgages, using its Bellemeade Re 2022-2 Ltd. special purpose reinsurer.

The reinsurance mainly covers a portfolio of mortgage insurance policies issued by Arch MI and affiliates from Nov. 2021 through June 2022, the company said.

The mortgage insurance-linked notes offered were:

$52,857,000 class M-1A notes with a coupon equal to one-month SOFR plus 400 basis points.
$105,000,000 class M-1B notes with a coupon equal to one-month SOFR plus 750 basis points.
$21,574,000 class M-2 notes with a coupon equal to one-month SOFR plus 925 basis points.
$21,574,000 class B-1 notes with a coupon equal to one-month SOFR plus 1200 basis points.

The top-up of traditional reinsurance amounted to $157,424,000 and was placed with a panel of traditional reinsurers, via Bellemeade Re 2022-2.

“Our Bellemeade program continues to be is an important part of Arch MI’s risk and capital management strategy,” explained Jim Bennison, EVP, Alternative Markets for Arch MI. “We are pleased with the continued support from our investors particularly during difficult market conditions.”

This was the 19th issuance under a Bellemeade Re structure for Arch’s mortgage insurance entities, with now over $9 billion of mortgage reinsurance secured from the largely capital markets backed deals. See details of every mortgage ILS in our Directory.

Arch is not the only mortgage insurer to struggle to secure the full layers of a mortgage deal from issuances of notes to capital market investors.

The mortgage ILS market has been slower this year, especially since the second-quarter when global capital market volatility became heightened.

Since then, layers have not been fully placed in most mortgage ILS tranches, with traditional reinsurance being used to top-up coverage.

You can read all about this new Bellemeade Re 2022-2 Ltd. mortgage insurance-linked securities (ILS) transaction from Arch Capital and every other mortgage ILS deal ever issued in our Artemis Deal Directory.