AIG’s mortgage insurance business, United Guaranty Corporation (UGC), has gained $298.6 million of indemnity reinsurance from Bellemeade Re II, for mortgage insurance policies issued in 2008 and earlier.
The insurance linked securities transaction is intended to transfer risk to investors and, according to AIG, could be the first of its kind involving policies from before 2008.
Currently, Bellemeade Re II is funding its reinsurance obligations through three repayment notes with 10-year legal maturities. This transaction will provide UGC with will fully collateralised coverage from Bellemeade Re II for potential losses on its legacy mortgage insurance portfolio.
Reinsurance is on a portion of UGC’s first-lien US mortgage insurance portfolio of policies issued before 2009. Previously, less than 20 percent of UGC’s gross risk in force was written pre-2009.
Donna DeMaio, president and CEO of UGC, 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.”
In August 2015 a similar deal was announced, in which UGC gained around $300 million of indemnity insurance from Bellemeade Re for a portfolio of mortgage insurance policies from 2009 to 2013.
