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Flurry of mortgage ILS issuances as market shows resilience

Bullish on ILS: Steve Evans of Artemis.bm

Two mortgage insurers have sponsored a total of $740 million of insurance-linked securities admitted for listing on the Bermuda Stock Exchange in the past week.

Genworth Mortgage Insurance and Radian Guaranty, both secured collateralised mortgage reinsurance using Bermudian-registered special purpose insurers.

Radian’s Eagle Re 2020-2 Ltd completed a $390.3 million transaction, while Genworth’s Triangle Re 2020-1 Ltd closed a $350 million deal.

According to the Artemis.bm alternative risk transfer website, issuance of mortgage insurance-linked notes to date in 2020 stands at almost $3.2 billion.

Other mortgage insurers to have used Bermudian SPIs to tap the capital markets include Essent Group, which has completed two issuances worth $895 million through its Radnor Re vehicle. Arch Capital Group has also secured $873 million worth of collateralised mortgage reinsurance in two issuances through Bellemeade Re.

The rush for extra mortgage reinsurance capacity comes as the economic impact of Covid-19 has put many borrowers under strain.

The ILS market has continued to attract investors through a testing year, with $12.5 billion worth of new issuances in 2020, contributing to a market comprising $44 billion of outstanding ILS, according to Artemis’s running total.

Bermuda remains the world leader in ILS, with its special purpose insurer regulatory framework and listings on the BSX proving a popular means of matching capital market funds with reinsurance market risks.

Steve Evans, founder of Artemis, argues in an opinion piece on the website that the resilience the ILS market has shown during the pandemic bodes well for its future expansion.

With “heightened risk awareness”, especailly among governments who have taken on the budget-busting costs of Covid-19, the transfer of more public-sector risks to the private sector is a probable outcome, he argues.

“Beyond the pandemic, the opportunity is perhaps even clearer,” Mr Evans wrote.

“Governments and public entities need to focus on their resources, financing and their own liquidity, to be able to deliver what society needs as it comes out of a pandemic.

“Hence, transferring away risks that are often too big to bear on their own is only likely to become more of a strategic priority, putting the ILS market and catastrophe bonds in the frame as potential solutions.”

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Published October 28, 2020 at 8:00 am (Updated January 21, 2021 at 5:00 pm)

Flurry of mortgage ILS issuances as market shows resilience

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