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

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

A record 12 home loan insurance-linked securities (ILS) deals have finished so far in 2021, taking yearly issuance to more than $5 billion for the really first time, as shown by the Artemis Deal Directory.Currently, home loan ILS (typically called home mortgage insurance-linked notes ILN) issuance is running approximately 18% greater than the previous record of $4.6 billion embeded in the 12-months of 2019, at a huge $5.4 billion.
After breaching $4.5 billion for the very first time in 2019, home loan ILS issuance decreased rather in 2020 to $4.3 billion, with experts warning early in the year that the Covid-19 coronavirus pandemic was expected to slow issuance in this market.
While total offer volume fell in 2020 by roughly 6% from the previous year, the number of deals did increase from 10 to 11. And, notably, regardless of the year-on-year dip in issuance it did stay above the $4 billion mark for successive years, a trend which has persisted and shows little sign of slowing.
The chart below, based upon data from the Artemis Deal Directory, reveals the growth in mortgage ILS over the past six years. The trend line represents the variety of deals, which has also grown considerably.

Home loan ILS are an example of insurance companies utilizing the ILS or catastrophe bond structure to source reinsurance capability from the capital markets for another hazard class.
These transactions have actually become crucial to the reinsurance and capital management plans of the US mortgage insurance coverage majors and have played a significant function in helping providers broaden their services, while moderating direct exposures.
The first mortgage ILS deal pertained to market in 2015, followed by another offer the list below year, before 2 offers then came to market in 2017.
Combined, the 4 offers released in this period amounted to around $1.2 billion. The 2015 and 2016 deals were both sponsored by United Guaranty (then part of AIG) through its Bellemeade Re Ltd. issuance platform.
In 2017, National Mortgage Insurance Corporation (NMI) went into the marketplace for the very first time with its Oaktown Re Ltd. platform.
Then, later in the year, the Bellemeade Re platform issued its 3rd offer, which was sponsored by Arch Capital Group after it got AIGs United Guaranty.
The list below year, the home loan ILS market began to acquire some genuine momentum as more sponsors entered the marketplace and offer sizes increased, with home loan insurance providers significantly aiming to capital markets backed sources of reinsurance capacity.
In total, 7 home loan ILS deals were released in 2018, bringing simply shy of $3 billion of danger capital to market, so more than double of what had actually been seen in the previous three years together.
Alongside 3 Bellemeade Re issuances during the year from Arch Capital and another Oaktown Re deal from NMI, first time sponsor Essent Guaranty got in with its Radnor Re platform, MGIC Investment Corporation provided its first Home Re offer, and Radian Guaranty sponsored its first offer under its Eagle Re platform.
So, from the very first deal in 2015 to the end of 2018, total mortgage ILS issuance reached roughly $4.2 billion from 11 transactions, which were brought to market by 5 different mortgage entities.
In 2019, the $4 billion limit was breached for the very first time, while the number of deals leapt from seven to 10.
Throughout this duration, which is the 2nd most active year ever for the issuance of mortgage ILS, the only new sponsor was Genworth Mortgage Insurance, which entered the marketplace through its Triangle Re platform.
Genworth was participated 2019 by the other 5 sponsors, a few of which were prolific in the year, consisting of Arch Capital which sponsored four separate Bellemeade Re deals throughout the period.
Essent Guaranty sponsored two handle 2019, while NMI, Radian Guaranty, and MGIC Investment Corporation each sponsored a single deal.
The 11 transactions provided in 2020 came from 5 out of the six sponsors. Arch Capital issued four Bellemeade Re offers, Essent Guaranty provided 2 Radnor Re deals, Radian Guaranty 2 Eagle Re deals, NMI 2 Oaktown Re offers, while Genworth provided a single Triangle Re deal.
Far in 2021, all six sponsors have returned to market to bring the record $5.4 billion of home mortgage ILS issuance.
This consists of three deals from Arch Capital, three deals from Genworth, two offers from MGIC Investment Corporation, two offers from NMI, and one offer from both Radian Guaranty and Essent Guaranty.
Of course, theres still the very best part of 2 months to go before the end of the year, and as revealed by the Artemis Deal Directory, Radian Guaranty is presently in the procedure of releasing its 2nd Eagle Re offer of the year, a $484 million transaction, while another deal is also prepared for imminently.
Must this Eagle Re deal close at this size, then 2021 mortgage ILS issuance would amount to $5.846 billion from 13 transactions. With time left for further issuances from a few of the other sponsors, its expected that home loan ILS issuance will well surpass $6 billion this year.
Since today, so omitting the current Eagle Re deal we have noted, an enormous $18.37 billion of mortgage ILS has been issued from 44 transactions, comprised of 187 tranches of notes.
The Bellemeade Re platform is the most respected in terms of the variety of deals and the total size of issuance. Since 2015, 17 Bellemeade Re deals have been issued amounting to more than $7.9 billion. Of this, Arch has actually sponsored all but the first two deals, or approximately $7.4 billion of issuance.
The 2nd biggest slice of home loan ILS issuance originates from the Radnor Re series sponsored by Essent Guaranty. Six of these offers have actually been released given that 2018, amounting to roughly $2.7 billion of overall issuance.
Radian Guarantys Eagle Re platform beings in 3rd place, in terms of the volume of danger capital, as 5 of these deals have featured because 2018 with a combined size of roughly $2.4 billion.
NMI was the first mortgage insurance provider to go into the market after the Bellemeade Re deals, and given that the introduction of its Oaktown Re series in 2017, has sponsored seven different deals with a combined value of approximately $2.1 billion.
The staying nine home mortgage ILS deals to have actually featured because 2015 consist of 5 from Genworth through its Triangle Re platform, which total up to approximately $1.8 billion, and 4 Home Re offers from MGIC Investment Corporation, amounting to around $1.4 billion.
Details of every home mortgage insurance-linked securities (ILS) deal can be seen in our Deal Directory.

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