United Guaranty Structures $299M of Reinsurance Coverage

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United Guaranty Corp., the private mortgage insurance subsidiary of American International Group, has obtained reinsurance coverage on approximately $299 million of the book of business it wrote between 2009 and the first quarter of 2013.

The coverage is being provided by Bellemeade Re Ltd., a Bermuda-domiciled special purpose insurer, which is funding the deal through the issuance to investors of three classes of 10-year notes.

In the past, AIG has used the insurance-linked securities market to transfer over $3 billion of risk to the capital markets from its property portfolio through the use of natural catastrophe bonds. This transaction extends the scope of ILS usage to the company's mortgage insurance business, a press release said.

News that AIG was looking to do this transaction broke in mid-July.

"United Guaranty's financial strength and depth of knowledge have enabled us to successfully tap the capital markets for risk transfer, a differentiator for us in the mortgage insurance space. This makes the MI industry financially stronger," said UG president and CEO Donna DeMaio in the press release.

While other legacy private mortgage insurers are turning to reinsurance transactions to help them reach the secondary mortgage market capital standards, UG previously has said it would be able to meet those requirementswhen they go into effect at the end of the year.

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