American International Group announced that its mortgage insurance business United Guaranty Corporation (UGC) obtained $298.6m of indemnity reinsurance from Bellemeade Re II Ltd., a special purpose insurer, for a portfolio of mortgage insurance (MI) policies issued in 2008 and prior years.
Bellemeade Re II is funding its reinsurance obligations through the issuance of three classes of amortizing notes with 10-year legal final maturities.
This insurance-linked securities (ILS) transaction provides United Guaranty with fully collateralized coverage from Bellemeade Re II for potential losses on a portion of its legacy MI portfolio.
United Guaranty President and CEO Donna DeMaio said, "We believe this marks the first time a mortgage insurer has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio made up of policies issued in 2008 and earlier years.
"The transaction not only helps United Guaranty manage risk, but also demonstrates that investors are willing to assign value to this type of portfolio from the 2008 and earlier period."
The reinsurance is on a portion of United Guaranty’s first-lien U.S. mortgage insurance portfolio of policies issued in 2008 and prior years. As of March 31, 2016, less than 20 percent of United Guaranty’s gross risk in force was written in 2008 and prior years.
In August 2015, American International Group, Inc. announced a similar agreement in which United Guaranty obtained approximately $300 million of indemnity reinsurance from Bellemeade Re Ltd., a special purpose insurer, for a portfolio of MI policies from 2009 through the first quarter of 2013.