Radian Guaranty has returned to the capital markets for its second mortgage insurance-linked securities (ILS) deal, marketing a $562 million Eagle Re 2019-1 Ltd. transaction in search of reinsurance backing from the capital markets.
The transaction follows Radian Guaranty's first mortgage ILS, or mortgage insurance-linked notes (ILN), transaction, the $434 million from the Eagle Re 2018-1 Ltd. transaction issued during the fourth-quarter of 2018.
Demonstrating the growing appetite to tap the capital markets for mortgage reinsurance, Radian Guaranty has already returned to the market with this second transaction, a larger deal but one that covers a different risk profile for the insurer.
The use of capital markets capacity for mortgage reinsurance is becoming an increasing trend and while these mortgage ILS transactions don't appeal to the majority of what we'd traditionally term ILS investors, given their clear correlation with financial market factors, they do appeal to large institutional investors elsewhere in their portfolios and as they use a typical ILS or catastrophe bond structure they are another interesting example of tapping the capital markets appetite for insurance-linked returns.
In essence, these transactions provide a source of fully collateralized excess of loss reinsurance protection to Radian Guaranty and with this second transaction mortgage ILS are set to become an increasingly large component of the firms reinsurance tower.
In its last transaction, Radian Guaranty tested the traditional reinsurance and ILS markets appetite for the deal, saying that the resulting structure offered it the flexibility it needed to engage both reinsurance and capital markets regularly in future.
It's possible that the reinsurer may again have brought traditional reinsurance alongside this new Eagle Re 2019 deal, but at this time we cannot confirm it.
We understand this mortgage ILS deal is set for completion this week, after which Radian Guaranty will have close to $1 billion of reinsurance protection provided by the capital markets through ILS structures exposed to losses on its mortgage insurance portfolio.
You can read all about the Eagle Re 2019-1 Ltd. mortgage ILS transaction and every other mortgage ILS deal in the Artemis Deal Directory.