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Annual mortgage ILS issuance exceeds $ 5 billion for the first time in 2021

A record 12 Mortgage Insurance Related Securities (ILS) transactions have been completed so far in 2021, bringing annual issues to over $ 5 billion for the first time, as shown in the Artemis Deal Directory.

Currently, mortgage ILS (often referred to as ILN Mortgage Insurance Bonds) issuance is about 18% higher than the previous record of $ 4.6 billion set in the 12 months of 2019, at a whopping 5%. , $ 4 billion.

After surpassing $ 4.5 billion for the first time in 2019, mortgage ILS issuance declined somewhat in 2020 to $ 4.3 billion, as analysts warned earlier this year that the pandemic of the Covid-19 coronavirus is expected to slow emissions in this market.

But while the total volume of transactions decreased by around 6% in 2020 compared to the previous year, the number of transactions fell from 10 to 11. And, above all, despite the drop in emissions from one year to the next. the other, it remained above the $ 4 billion mark. for years in a row, a trend that has continued and shows little sign of slowing down.

The graph below, based on data from the Artemis Deal Directory, shows the growth of mortgage ILS over the past six years. The trend line represents the number of transactions, which has also increased significantly.

Mortgage ILS is an example of an insurer using the ILS or catastrophe bond structure to procure reinsurance capacity from the capital markets for another category of risk.

These transactions have become central to the reinsurance and capital management arrangements of the US mortgage insurance majors and have played an important role in helping carriers grow their businesses while moderating exposures.

The first mortgage ILS deal hit the market in 2015, followed by another deal the following year, before two deals hit the market in 2017.

Together, the four transactions issued during this period amounted to approximately $ 1.2 billion. The 2015 and 2016 transactions were both sponsored by United Guaranty (then part of AIG) through its issuance platform Bellemeade Re Ltd.

In 2017, National Mortgage Insurance Corporation (NMI) first entered the market with its Oaktown Re Ltd. platform.

Then, later in the year, the Bellemeade Re platform released its third deal, which was sponsored by Arch Capital Group after acquiring United Guaranty from AIG.

The following year, the mortgage ILS market started to gain momentum as more sponsors entered the market and deal sizes increased, with mortgage insurers turning more and more towards sources of reinsurance capacity backed by capital markets.

A total of seven ILS mortgage deals were issued in 2018, bringing just under $ 3 billion in venture capital to the market, more than double what had been seen in the previous three years together.

Along with three Bellemeade Re issues during the year from Arch Capital and another Oaktown Re deal from NMI, the first sponsor Essent Guaranty entered with its Radnor Re platform, MGIC Investment Corporation issued its first Home Re deal. , and Radian Guaranty sponsored its first agreement as part of its Eagle Re Platform.

So from the first deal in 2015 until the end of 2018, total mortgage ILS issuance reached around $ 4.2 billion across 11 deals, which were brought to market by five different mortgage entities.

In 2019, the threshold of $ 4 billion was crossed for the first time, while the number of transactions rose from seven to ten.

During this period, which is the second busiest year on record for ILS mortgage issuance, the only new sponsor was Genworth Mortgage Insurance, which entered the market through its Triangle Re platform.

Genworth was joined in 2019 by the other five sponsors, some of whom have been prolific during the year, including Arch Capital which sponsored four separate deals with Bellemeade Re during the period.

Essent Guaranty sponsored two transactions in 2019, while NMI, Radian Guaranty and MGIC Investment Corporation each sponsored a single transaction.

The 11 transactions issued in 2020 came from five of the six sponsors. Arch Capital issued four Bellemeade Re agreements, Essent Guaranty issued two Radnor Re agreements, Radian Guaranty two Eagle Re agreements, NMI two Oaktown Re agreements, while Genworth issued a single Triangle Re agreement.

So far in 2021, all six sponsors have returned to the market to bring in the record $ 5.4 billion in mortgage ILS issuance.

This includes three Arch Capital transactions, three Genworth transactions, two MGIC Investment Corporation transactions, two NMI transactions, and one Radian Guaranty and Essent Guaranty transaction.

Of course, there is still the best part of two months before the end of the year, and as the Artemis Deal Directory shows, Radian Guaranty is currently in the process of issuing its second Eagle Re deal of the year, a amount of $ 484 million. transaction, while another transaction is also expected imminently.

If this deal with Eagle Re were to close at this size, mortgage ILS issuance in 2021 would total $ 5.846 billion out of 13 deals. With time remaining for further issuance from some of the other sponsors, mortgage ILS issuance is expected to well exceed $ 6 billion this year.

To date, excluding the last Eagle Re transaction that we have listed, a whopping $ 18.37 billion of mortgage ILS has been issued from 44 transactions, comprising 187 tranches of notes.

The Bellemeade Re platform is the most prolific in terms of number of transactions and overall issue size. Since 2015, 17 Bellemeade Re transactions have been issued for more than $ 7.9 billion. Of that amount, Arch sponsored all but the first two deals, or roughly $ 7.4 billion in issues.

The second largest tranche of mortgage ILS issuance comes from the Radnor Re series sponsored by Essent Guaranty. Six of these transactions have been issued since 2018, for a total amount of approximately $ 2.7 billion.

Radian Guaranty’s Eagle Re platform ranks third, in terms of venture capital volume, as five of those deals have featured since 2018 with a combined size of around $ 2.4 billion.

NMI was the first mortgage insurer to enter the market after the Bellemeade Re transactions, and since the introduction of its Oaktown Re series in 2017, has sponsored seven separate transactions with a combined value of approximately $ 2.1 billion .

The nine ILS mortgage transactions remaining since 2015 include five from Genworth through its Triangle Re platform, which amount to approximately $ 1.8 billion, and four Home Re transactions from MGIC Investment Corporation, for a total of approximately 1 , $ 4 billion.

Details of each Mortgage Insurance Related Securities (ILS) transaction can be viewed in our transaction directory.

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