Winner: Arch MI

Following two years of significant growth in the European SRT space, Arch MI has been named Credit Insurer of the Year in SCI’s 2023 CRT Awards. The firm has significantly increased the aggregate value of its insured SRT book, expanded its team and increased its deal volume significantly, most notably in central and southern Europe.

With a significant presence in the Australian and US mortgage insurance sector, Arch’s global mortgage group views SRT as a positive balance sheet diversification play. Since writing its first unfunded mortgage trade in 2018 in Germany, the firm’s European division has expanded into more than 10 geographies.

Ruairi Neville, head of European origination in Arch’s international mortgage division, says the expansion into European SRT provides Arch with access to a growing sector spread across a broad range of geographies. “SRT allows us to grow our book in a prudent manner across both asset class and geography,” he notes. “We like the structural aspects of the trades, which allow us to attach at various risk points, depending on our appetite for a given asset class.”

He adds: “Arch has established direct relationships with Europe’s leading banks since we wrote our first credit insurance transaction in 2012. Many of the transactions we wrote in 2022 are repeat trades with banks we have established an existing partnership with.”

“Strong relationships are key,” says Neville. “We want to do business with people and institutions we trust. The banks we transact with have been excellent counterparties and we have developed positive relationships with them. We understand what they want and need from a transaction, and importantly what they can deliver in terms of data and background to the risk. “

Neville stresses the importance of Arch’s ability to structure cover in accordance with a client’s needs. “We have written transactions in both the insurance and financial guarantee format and have participated in structures where there is a mix of funded and unfunded investors.”

He adds: “At Arch, we also see a growing demand for SRT transactions from both IRB and SA approach banks and we have concluded transactions across both regulatory approaches. Many SA approach banks are often first-time issuers and we work closely with these institutions to find a structure and portfolio which makes economic sense for both parties.”

This openness to diversify when faced with compelling opportunities has also been a catalyst for the expansion of Arch’s global mortgage group into new countries throughout Europe. The firm has been particularly active in Italy, Spain and Portugal - jurisdictions where it likes both the risk and structure of the deals it has come across. It has also recently written trades in the CEE region.

“We're not afraid to break ground,” Neville says. “We have the appetite, capacity and expertise to write SRT trades in countries where they haven't been written before. If the bank is a credible counterparty with strong underwriting standards and the country at a macro level is supportive of a transaction, then Arch has the ability to execute the trade.”

In Italy, for example, Arch has worked towards a material presence through relationship-driven repeat transactions with existing customers. The division’s ventures into central Europe last year saw it write the region’s first private unfunded mortgage SRT trade. Also last year, the business wrote the first private unfunded SRT trade in the Iberia region, which Neville says was a landmark transaction in terms of geographic location, asset class and the size of the underlying tranche.

When asked what differentiates Arch from the traditional SRT funded investor, Neville says: “As an insurer, we provide a diversified and stable source of capital to our clients and unlike certain cash investors, we are willing to write transactions with longer maturities. From a commercial point of view, given the widening of cash spreads, insurers can be competitive versus funded investors.”

Over the past 12-18 months, Arch has focused heavily on building out its SRT team. “We have invested significantly in our team, building our expertise across underwriting, actuarial, legal, banking and finance to ensure we have the in-house capabilities to review and conclude transactions which fall within our risk appetite,” Neville says. “With this additional strength on our bench, we believe we are strongly resourced to provide a best-in-class service to our clients.”

He concludes: “Arch has a deep commitment to the SRT sector and we view it as a core growth area going forward. We have accomplished a lot in the last two years, but I believe we are just taking off and there is a long and very interesting road ahead of us.”

Honourable mention: RenaissanceRe 
With a credit team comprising 13 professionals from multiple disciplines, RenaissanceRe’s broad expertise differentiates the firm from its peers and allows it to develop risk transfer solutions with a unique insight and tailored approach. Since its first SRT transaction in 2018, the firm has grown its credit portfolio to over US$1bn of gross written premium across many asset classes, jurisdictions and originating banks in a variety of formats. Looking forward, RenaissanceRe is continuing to advance its strategy as a leading P&C reinsurer through the acquisition of Validus Re. The transaction is expected to close in 4Q23 and will provide access to a diversified portfolio of over US$3bn gross written premium.

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.