Arch Mortgage Insurance Company (Arch MI) announced that it has obtained over $643 million of indemnity reinsurance on a pool representing approximately $38 billion of mortgages from Bellemeade Re 2021-1 Ltd., a special purpose reinsurer. The coverage was obtained by issuing approximately $580 million in bonds and $64 million in direct reinsurance. This transaction largely covers a portfolio of MI policies issued by Arch MI and affiliates from September through November 2020.
This Mortgage Insurance-Linked Note (MILN) transaction is Arch’s first of 2021 and the 15th Bellemeade transaction since the program’s inception in 2015. Additionally, this is the first MILN to use the Secured Overnight Financing Rate (SOFR) as the benchmark rate for pricing — replacing the long-standing use of the London Inter-Bank Offered Rate (LIBOR) as the benchmark interest rate.
Bellemeade Re 2021-1 Ltd. is funding its reinsurance obligations through the issuance of five classes of amortizing notes with 10-year legal final maturities.
The senior M-1A class of notes received an A1 rating from Moody’s Investor Service (Moody’s) and BBB (high) from DBRS Morningstar. The M1B class of notes received an A3 from Moody’s and BBB from DBRS Morningstar. The M-1C, M-2 and B-1 received Baa3, Ba3 and B3 ratings, respectively from Moody’s. Those three classes were not rated by DBRS Morningstar. Additionally, Arch created a B2 class of notes for this transaction that it will not issue at this time.
Pricing detail for the five classes of offered notes is below:
- $188,782,000 class M-1A notes with a coupon equal to one-month SOFR plus 175 basis points.
- $118,203,000 class M-1B notes with a coupon equal to one-month SOFR plus 220 basis points.
- $138,583,000 class M-1C notes with a coupon equal to one-month SOFR plus 295 basis points.
- $112,021,000 class M-2 notes with a coupon equal to one-month SOFR plus 485 basis points.
- $21,324,000 class B-1 notes with a coupon equal to one-month SOFR plus 675 basis points.
A total of $63,860,000 was placed with a panel of reinsurers.
“Closing our first Bellemeade transaction of the year with nearly 30 investors is a testament to the maturity of the program,” said Jim Bennison, EVP, Alternative Markets for Arch MI. “As the leader in the space, it is important to demonstrate a seamless transition from LIBOR to SOFR to establish a precedent that we expect other MILN issuers to follow.”
About Arch MI
Arch MI, a wholly owned subsidiary of Arch Capital Group Ltd., is a leading provider of private insurance covering mortgage credit risk in the U.S. Headquartered in Greensboro, North Carolina, Arch MI's mission is to protect lenders against credit risk, while extending the possibility of responsible home ownership to qualified borrowers. Arch MI’s flagship mortgage insurer, Arch Mortgage Insurance Company, is licensed to write mortgage insurance in all 50 states, the District of Columbia and Puerto Rico. For more information, visit archmi.com.
About Arch Capital Group Ltd.
Arch Capital Group Ltd., a publicly listed Bermuda exempted company with approximately $15.8 billion in capital at Dec. 31, 2020, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.
Cautionary Note Regarding Forward-looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward−looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward−looking statements.
Forward−looking statements can generally be identified by the use of forward−looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. Forward−looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve its ratings; investment performance; the loss of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events, including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; the Company’s ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses the Company has acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage the Company’s gross and net exposures; the failure of others to meet their obligations to the Company; changes in the method for determining the London Inter-bank Offered Rate (“LIBOR”) and the potential replacement of LIBOR and other factors identified in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”).
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.
Source: Arch Capital Group Ltd.
Arch Capital Services LLC.