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Bermuda reinsurers helping more Americans become home owners

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Analysis: Over half of US mortgage reinsurance is backed by Bermuda’s world-class reinsurance market

Bermuda reinsurers helping more Americans become home owners
Analysis: Over half of US mortgage reinsurance is backed by Bermuda’s world-class reinsurance market

Hamilton, Bermuda (May 27, 2021)— More than half of US mortgage reinsurance is backed by Bermuda’s world-class reinsurance market, according to new analysis by the Association of Bermuda Insurers & Reinsurers (ABIR).

Bermuda-based global carriers are providing innovative mortgage solutions that are helping more and more Americans become homeowners. Reinsurance companies on the island provided increased capacity to US monoline private mortgage insurers in recent years—upping their share of all-important reinsurance support from just under 30% in 2016 to over 50% in 2020. The data underscores growing demand for diverse sources of global capital to support the US housing market, while reducing risks to US taxpayers.

“The Bermuda re/insurance market has long been known to provide peace of mind for Americans against natural catastrophe risks, including hurricanes, tornados and floods,” said Marc Grandisson, CEO of Arch Capital Group and Chair of ABIR. “Now, data shows the Bermuda market is playing an increasing role in helping Americans achieve the dream of home ownership.”

ABIR analysed data from the US National Association of Insurance Commissioners (NAIC) filings for US monoline mortgage guaranty premiums ceded, and noted the following growth trend:

Year Bermuda Market Share of US Monoline Mortgage Insurers Reinsurance

2016 29.5% 
2017 30.1%
2018 33.7%
2019 43.8%
2020 50.3%

“Mortgage insurance plays a critical role in making home ownership possible for many Americans,” noted Grandisson. “It eases the burden of down payments and provides a fast track to buying property. Without it, many citizens would have to wait years to save up to purchase their own home.”

Bermuda-based reinsurers help boost the financial strength of private mortgage insurers, thereby supporting the flow of affordable credit to American households. The Bermuda market is also playing a significant role in directly supporting the government sponsored entities (GSEs), Fannie Mae and Freddie Mac, and the credit risk transfer (CRT) market.

Created to enhance the flow of credit to the American housing sector, both enterprises have adapted their business models in recent years, from buying and holding credit risk to syndicating risk to well-capitalized, diversified reinsurers and capital markets providers.

ABIR members stepped up over the last decade, providing significant capital to support the GSE CRT programs, as well as the US real-estate market’s recovery and transformation broadly. Bermuda reinsurers now support the US housing market in a variety of ways, regularly participating in traditional reinsurance arrangements, credit risk transfer (CRT) transactions, and mortgage insurance linked notes (MILN) transactions.

With their strong capital positions, diversified business lines, and deep expertise in US mortgage credit risk, Bermuda reinsurers are well positioned to provide capital and expertise to help expand sustainable homeownership. Global broker AON estimates that CRT from GSEs to the Bermuda reinsurance market was approximately 60% in 2020, further protecting US taxpayers.

Home ownership is particularly important for minority communities, creating a foundation for building generational wealth, along with family and financial security. Real estate often represents a first investment—and a way to begin closing the wealth gap.

“The post-pandemic economy, coupled with an increasing global focus on facilitating equitable opportunities in all communities, could amplify the role reinsurance capital plays in making home ownership possible,” said John M. Huff, CEO of ABIR. “The Bermuda market is pleased to be part of the process in helping all Americans benefit from home ownership.”

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About ABIR: The Association of Bermuda Insurers & Reinsurers (ABIR) represents Bermuda’s major property and casualty insurers and reinsurers doing business in 150 countries. Bermuda is an internationally recognized center of global expertise on underwriting for catastrophe, climate, cyber, mortgage & credit risk transfer products, along with other specialty insurance and reinsurance. For more information, please visit: Follow us on Twitter @ABIR_Bermuda

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