11 January 2021ILS

Gallagher Re, Arch MI partner on fourth Bellemeade Re deal

Gallagher Re has partnered with Arch Mortgage Insurance Company (Arch MI) to raise and place traditional reinsurance capacity for Bellemeade Re 2020-4, a special purpose reinsurer.

In the fourth and final Bellemeade transaction of 2020, Gallagher Re provided $15.6 million of indemnity reinsurance for Arch MI on a pool representing approximately $33.3 billion of mortgages linked to loans issued by Arch MI and affiliates. The mortgages were primarily written the second half of 2019 and came from the same portfolio of MI policies as Bellemeade Re 2020-1.

It means Gallagher Re and Arch MI partnered on over $140 million of traditional reinsurance capacity over a six month period. Bellemeade Re 2020-1 became the first mortgage indemnity insurance-linked note (ILN) transaction since the onset of COVID-19 in July 2019, and was the first to incorporate traditional reinsurance capacity.

Freddie Scarratt, the account executive at Gallagher Re who managed and placed the reinsurance capacity, said collaborative partnership has never been more important than in the current testing environment. “Reinsurers continue to demonstrate their preparedness to back new mortgage indemnity transactions when presented with risk transfer experience and expertise in this highly specialist field,” he said.

Danny Mamo, senior vice president of structured capital and reinsurance at Arch MI, said: “Our goal in 2020 was to explore the appetite of the traditional reinsurance market for simultaneous side-by-side participation in the Bellemeade Re programme with the capital markets.  We knew the simultaneous execution would be a novelty in the market and despite the challenges brought on by the COVID-19 pandemic, we were able to attract consistent participation from multiple reinsurers on all Bellemeade Re transactions completed in 2020.  We have found yet another innovative structure to expand our relationship with the reinsurance market.”

Steve Rance, managing partner of mortgage indemnity reinsurance at Gallagher Re, highlighted the achievement of raising more than the required capacity at a time when COVID-19 was creating significant economic uncertainty.

“The growing relationship between Arch MI and reinsurers reinforces the importance and effectiveness of traditional reinsurance as a capital source for mortgage insurance business, both in the US and further afield,” he added.