Arch Capital is once again hoping to reopen the market for mortgage insurance-linked securities (ILS), seeking $199.3 million of capital markets backed mortgage reinsurance through a deal, which will be the first issuance of mortgage insurance-linked notes in more than one year.We’d heard that Arch Capital had originally registered the Bellemeade Re 2025-1 Ltd.issuing entity in Bermuda at the end of August and finally a transaction has come to light.We haven’t seen any mortgage insurance-linked notes issuances since September 2024 now, so more than one year.

Arch Capital’s last mortgage ILS deal was in August 2024 and at the time that was also the first in almost ten months.The use of mortgage insurance-linked securities to support mortgage insurer’s reinsurance capital needs has slowed dramatically since 2023 and over the last year outstanding deals have also continued to be redeemed early as well.It’s been more efficient to close out vintage deals rather than continue to service them, while mortgage insurer required capital levels have been adjusting to the rules and cost-of-capital, resulting in changes to their need for reinsurance.

Interest rate developments and spread levels have also been a driver for keeping the mortgage insurers away from the securitized market.But Arch Capital continues to see the mortgage ILS instrument as a valuable way to source third-party capital to support its PMIER capital and need for reinsurance to underpin the expansive mortgage book of its mortgage insurer business.Bellemeade Re 2025-1 Ltd.

is expected to be licensed as a restricted special purpose insurer (SPI) in Bermuda and it is aiming to issue five tranches of mortgage insurance-linked notes, with Aon Insurance Managers (Bermuda) Ltd.managing the vehicle for the sponsor.The ceding companies are the typical two mortgage insurers of the Arch stable of companies, being Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company.

In total, $199.3 million of notes are the target issuance size, with all five tranches set to have an 80% coverage rate for their corresponding reinsurance coverage levels.If successfully sold to investors, the notes issued by Bellemeade Re 2025-1 Ltd.will provide Arch Capital’s mortgage insurance entities with multi-year and amortising mortgage reinsurance sourced from the capital markets.

The five rated tranches of notes that Bellemeade Re 2025-1 aims to issue will be backed by reinsurance premiums, eligible investments, and related account investment earnings, relating to a pool of mortgage insurance policies linked to residential loans in each case.The notes are exposed to the risk of losses the ceding insurer pays to settle claims on the underlying mortgage insurance policies, so the sale of the notes will provide the collateral to cover that risk with reinsurance.The subject pool of insured mortgage loans consists of 153,074 fully amortizing first-lien fixed- and variable-rate mortgages, all underwritten to a full documentation standard, with original loan-to-value ratios in the majority less than or equal to 100.0%, and never having been reported to the ceding insurer as 60 or more days delinquent.

Rating agency Mornignstar DBRS noted that this is this is the first rated mortgage insurance-linked note transaction where the target credit enhancement (CE) is tied to PMIERs capital requirement.The mortgage loans all have insurance policies that came into force from January 2024 to September 2025.Details of the five tranches of mortgage insurance-linked notes being offered, which all have a 10-year term, and their corresponding Morningstar DBRS ratings can be seen below: It’s encouraging to see Arch return to source collateralized reinsurance protection for the funded portion of the mortgage insurance losses on this portfolio from the capital markets.

It’s often the case that when Arch brings mortgage ILS deals to market, there is typically a traditional mortgage reinsurance purchase made alongside the issuance of these notes, to build Bellemeade Re 2025-1 into a more meaningful source of protection for Arch Capital’s mortgage insurance business.The coverage percentages could also increase, if investor appetite allows, so the deal could increase in size before its close in just over one week, we understand.While catastrophe bonds are the main focus of the data we collect, we do also have some .

We do not include mortgage ILS in any other charts than these two that are specific to that market and we do not include mortgage ILS in our market issuance and outstanding figures, they are catastrophe bond only.You can read all about the mortgage insurance-linked securities transaction and every other mortgage ILS deal by filtering our extensive Artemis Deal Directory..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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