Contents

Structured Finance

Unpredictable factors

Macro and micro challenges highlighted

European market participants are facing three unpredictable factors in 2019, all of which will drive ABS activity and supply in the new year. ECB monetary policy evolution, Brexit execution and securitisation legislation implementation represent challenges from both macro and micro perspectives.

Among these challenges is the Basel 4 output floor. Alexander Batchvarov, md at BofA Merrill Lynch Global Research, observes: “The output floor is increasing the capital needs of the banks currently applying internal models for their capital calculations, and we will start to see the effect of its introduction as soon as 2019, we think.”

Such banks will now have to use an external model and meet a minimum requirement. Banks are attempting to address this change by increasing their capital before the new output floor is implemented.

Avenues banks are exploring to increase capital include: asset disposal, capital raising, and cash and synthetic securitisation. Synthetic securitisation is viewed as the most appropriate way of addressing capital needs – a trend that is expected to continue into 2019.

The BofA Merrill Lynch Global Research team emphasises the weakening economic growth and slow structural reform of European member states, as well as the ECB’s tightening monetary stance. Next year will also see TLTRO II redemptions coming to fruition.

TLTRO funding can be replaced by public issuance, the BAML research team argues - which is expected to surge if the ECB does not launch TLTRO III. While potentially beneficial for fixed income assets, TLTRO III could be potentially negative for securitisation supply.

“Swerving to Brexit,” Batchvarov states, “in the event that no transition period is agreed, we can expect to see significant fluctuation in the market. Even though I think that outcome is of low probability, still there is some tail risk.”

Finally, there is additional concern over the new STS regulation to be implemented in January. This will increase due-diligence requirements for investors, which may lead to low issuance in 1H19.

“Small issuers are likely to be impacted more than big issuers,” Batchvarov continues. “The smaller firms are not as well-resourced and a lack of a transition period, especially when it comes to ESMA transparency and disclosure requirements, will affect them the worst. This is not conducive to a healthy market development.”

He concludes: “There are two sides to the new legislation. If the issuers do not provide the information required under Article 7, then the investor will not be able to fulfil the due-diligence requirements of Article 5. The penalties apply to both: not only the issuer, but also the investor will be effected.”

Tom Brown

Structured Finance

Stress test

IFRS 9 impact limited

The EBA’s recent stress tests point to a limited capital impact from the implementation of IFRS 9. The stress test results follow the release of bank quarterly results, which also highlighted a limited impact from the first-time adoption of IFRS 9 (SCI 14 May).

The negative impact of IFRS 9 first implementation on banks’ aggregate CET1 ratio is -20bp on a fully loaded basis and -10bp on a transitional basis, according to the stress tests. Individual bank figures range between negative 104bp to positive 97bp. Hungarian, Irish, Italian and Polish banks experienced the largest declines.

The stress tests show a front loading of losses due to IFRS 9 in the first year. The overall share of stage one exposures decreases over the test’s three-year horizon by 10 percentage points.

The share of stage two and three exposures increases over the same time span by six and four percentage points respectively. Stage one exposures comprise the bulk of the exposures at 90% and 80% of the first and third year of the scenario respectively.

Furthermore, for stage one and stage two exposures, the coverage ratio stays roughly stable over the stress test horizon, while for stage three it steadily decreases. This is driven by the high increase in the share of stage three exposures (+133%) and the lower loss rates being applied to new defaults, compared to the loss rates of the initial defaults. The coverage ratio for stage three exposures is the highest at 48% and 42% in the first and third year of the scenario respectively.

However, as expected, the scenario is a construct that doesn’t take into account the real world complexities associated with IFRS 9. According to Moody’s, there are insufficient published data to allow the market to compare the capital impact of IFRS 9 against IAS 39 accounting standards.

Alain Laurin, associate md at Moody’s, explains: “Comparing the impact of IFRS 9 between banks can be hard because the accounting models that each of them use can be materially different. We don’t know, for example, all the details as to how banks move exposures between stage one and two assets. The review of banks’ estimates from supervisors and the EBA certainly ensured that variations stemming from banks’ accounting models would not have too much of an impact for the sake of consistency.”

Furthermore, the test utilises a static balance sheet assumption, meaning that the balance sheet doesn’t adjust for possible managerial actions that mitigate the impact of the shocks. The aim here is to ensure the consistency and comparability of projections. But analysts point to the implications of this constraint, which is that although stage two exposures can move to stage one and three, exposures in stage three cannot be cured. 

IFRS 9 is reflected for the first time in the tests through the accounting standard’s three stages. Specifically, the adverse shock determines the migration of exposures across stages and the need for additional impairments, affecting banks’ capital positions.

Banks that apply IFRS 9 in the 2018 financial year have restated their 2017 starting figures according to IFRS 9. Since the implementation of IFRS 9 is subject to transitional arrangements, both transitional and fully loaded ratios are provided.

The three-year stress scenario (2017-2020) is the EBA’s toughest to date. The scenario implies a deviation of EU GDP from its baseline level by 8.3% in 2020, an increase in unemployment of about 3.3 percentage points by 2020, a fall in inflation by 1.9% below the baseline and a fall of residential and commercial real estate prices by 27.7% and 27.1% respectively below the baseline level by 2020.

The exercise does not include a defined pass or fail threshold, but the results of the stress test will act as a foundation for discussions between banks and supervisors in order to establish relevant capital management plans.

Stelios Papadopoulos

CLOs

Mezzanine muddling

European CLO and CMBS markets update

European traders are focusing on secondary US CLO paper today, with 21 lines on BWICs compared with seven out for the bid in the European market (see SCI’s BWIC calendar). European CLO volumes have been low, yet triple-B bonds have performed steadily, contrary to expectations that they would perform badly this week.

“Clients have been quiet. There is no trend at the moment, that is the thing,” says one trader.

He adds: “Clients are not willing to take much risk. They are not selling because if they sell 10% of their holdings, then the rest of their 90% could also be impacted.”

Elsewhere, in the European primary market, the Oranje (ELOC 32) CMBS is set to price either tomorrow or Friday. While IPTs on the senior notes are expected to be quite strong, those on the mezz tranches are likely to be low.

The trader remains wary of a negative reaction in the market next week as the Italian government awaits feedback from the European Commission, which rejected the Italian budget on 27 October. “Italian spreads are currently wider than Mexico’s, nearly at 130bp. Hopefully, something will be agreed before they reach 150bp. The government has to compromise before markets are forced to react,” he concludes.

Tom Brown

CLOs

Midterm market

US CLO market update

High new issue volumes continue in the US CLO market, with managers paying more to get their deals away before year-end. BWIC activity also remains strong, in line with the market rally due to the US midterm election results.

One trader says there is a divergence between primary and secondary spreads. “BWICs are doing quite well, but new issues are drifting wider than expected,” he notes.

The trader explains that the secondary market is well bid at the moment and it could either “follow new issues wider” or “just bounce around sideways” in the coming week.

“This year has seen some big blockbuster issues,” he adds, highlighting that 2018 has been an exhausting year for traders. “That, along with the midterms, means that people are a little fatigued.”

The market consensus on the midterm elections is that the split Senate and House will lead to more deadlock, which will put checks on both political parties. “The market feels good about that,” the trader concludes. “It is reacting to a check on President Trump.”

Tom Brown

CMBS

Strong technicals

European RMBS and CMBS primary market update

Technicals remain strong in the European CMBS and RMBS primary markets.

The Dilosk No. 2 deal is in focus in the primary RMBS market. Initial price thoughts of 90-95 have been released for the transaction’s senior notes – which are expected to pay a coupon of three-month Euribor plus 75bp – and it is likely to price on Wednesday (7 November).

There has been some spread widening in European RMBS in recent weeks, reportedly driven by tensions between Brussels and Rome over the extension of the Italian GACS programme. Government bonds under pressure have also led to a reduction in price for Spanish and Portuguese RMBS bonds.

“I do not see why investors would buy a two-year Italian RMBS with 1.5 yield when they can buy another RMBS in the rest of Europe for 2.5,” says one trader. “The tension is definitely affecting the market.”

Meanwhile, CMBS issuance is expected to pick up in the coming months. Morgan Stanley is currently in the market with a Dutch deal named ELOC 32 (Oranje), while Blackstone’s Arrow CMBS 2018 is set to price next week.

“CMBS is a class that has been lagging behind the rest of the sector and we are now seeing a come-back in the last few months of the year,” the trader explains. “We are waiting to get some colour on where the main CMBS in Europe is at. These two deals will let me know if there is room for more new issues in the space.”

The trader points out that most CMBS primary issuance has been in the UK and Italy since the start of the year. There are six CMBS BWICs due tomorrow, with mainly 2018 bonds out for the bid, which should provide further colour to the market (see SCI’s BWIC calendar).

Tom Brown

RMBS

Broad attention

European RMBS primary market update

A new UK non-conforming RMBS is expected to enter the pipeline within the next two weeks. The originator of the deal is, as yet, unknown.

“The issuer does not want the deal going into December,” says a trader. “Hence, that gives it roughly a two-week window to get it printed.”

Meanwhile, the Dilosk 2 Irish legacy RMBS is set to price tomorrow (7 November) and is attracting a lot of market attention (SCI 5 November). “It has been taking up all of my time because the extension risk is significant,” explains the trader. “The bonds are pricing with a set of discount margins, with the aim of mitigating extension risk.”

Pre-crisis senior Irish RMBS bonds currently offer an average yield of 1.5%-1.75%, whereas post-crisis they yield on average 3%. The trader concludes: “The base rate of the Irish mortgage market is lower in general, but the actual margin is wider.”

Tom Brown

ABS

Alternative model mooted

SCI's MPL Securitisation Seminar line-up finalised

An alternative marketplace lending model could gain traction, thanks to the OCC fintech charter (SCI 12 September). This development, along with the efforts of Congress to resolve outstanding issues around the Madden doctrine and true lender status, is set to be discussed at SCI’s 4^th Annual Marketplace Lending Securitisation Seminar in New York on 14 November.

Other panels at the event will explore applying blockchain in securitisation, MPL ABS structuring considerations and the investor perspective. During the keynote session, Senator Christopher J Dodd will discuss the agenda for the Financial Services Committee in the coming Congress.

The OCC charter provides for the creation of special purpose banks in the fintech space. “The benefit of this approach is that, as a bank, a platform would enjoy preemption authority and the ability to export the interest rate of its home state to other states. However, as a non-deposit taking institution, it wouldn’t be able to leverage off a funding platform,” says Henry Morriello, partner, head of structured finance and derivatives at Arnold & Porter. He will be co-chairing the legal and regulatory considerations panel at the event with Tim Saunders, md and associate general counsel at Goldman Sachs.

“Fintech innovation is increasing across the financial landscape,” Morriello continues. “However, various models employed in connection with such have their challenges. For example, the bank partner model continues to be challenged under the true lender doctrine, while the OCC charter is being challenged by various state regulators.”

He notes that Congress is trying to resolve some of these issues, like the McHenry bill that seeks to provide a legislative solution to override the Madden doctrine and the Hollingsworth bill that seeks to address the true lender doctrine as well. “However, the future of financial legislation is in question,” he suggests.

Hosted by Arnold & Porter, SCI’s seminar will take place at 250 West 55^th Street, New York. The event is sponsored by DBRS, Global Debt Registry and TMF Group.

Representatives from ARTBLX, Credit Suisse, DrawBridge Lending, dv01, 1^st Associates, Goldman Sachs, Intain Fintech, Marketplace Lending Association, Monroe Capital, Morgan Stanley, PeerIQ, SoFi, Wall Street Blockchain Alliance, West Wheelock Capital and Wilmington Trust will also be speaking on the panels.

For more information on the event or to register, click here.

Structured Finance

SCI Start the Week - 5 November

A review of securitisation activity over the past seven days

Transaction of the week
Waterfall Asset Management is marketing the first publicly-rated RMBS backed by reverse mortgages since 2007. Dubbed Cascade Funding Mortgage Trust 2018-RM2, the US$571.8m transaction is backed by 915 active, proprietary reverse mortgage loans originated between 2002 and 2008 (SCI 2 November).

The underlying loans were originated by eight legacy reverse mortgage lenders and subsequently aggregated by Cascade and Waterfall-controlled entities. This was over a period of eight years via an acquisition of assets from Aurora Loan Services, Merrill Lynch, Lehman RE, SASC 2005-RM1 and Financial Freedom.

The majority of the loans in the transaction are adjustable rate based on six-month Libor, with a weighted average margin of 3.57. Over half (491) of the loans have future draw availability in an aggregate amount of US$37.8m, or 6.6% of the current outstanding balance.

Currently, around 83.5% of the portfolio is serviced by CompuLink Corporation and approximately 16.5% is serviced by Reverse Mortgage Solutions. Waterfall Asset Management serves as asset manager, providing servicer oversight in addition to other obligations.

Like all reverse mortgages, the assets are negatively amortising, with interest payments capitalised to the loan balance over time. The class A notes are paid interest when due, but the subordinate notes accrue and capitalise interest over time.

The weighted average youngest active borrower age in the pool is approximately 84 years. As a result, mortality and morbidity events will tend to be more front-loaded and therefore serve as a mitigating factor for the current LTV of the loans, of around 63.8%.

Other deal-related news

• Fannie Mae has priced its first credit risk-sharing RMBS notes to be issued as REMICs. Dubbed Connecticut Avenue Securities (CAS) 2018-R07, the US$921.89m deal references a pool of 98,657 prime fixed-rate mortgages, totalling approximately US$24.3bn. The transaction is designed to promote the continued growth of the credit risk transfer market by expanding the potential investor base for these securities, including by attracting REIT investors (SCI 30 October).
• Arch Mortgage Insurance has completed a capital relief transaction on a €3bn subset of an ING DiBa residential mortgage loan portfolio (SCI 2 November). The firm says the transaction is the first of its kind in Europe and is designed to support mortgage lending in Germany, representing a “valuable new tool” for financial institutions in managing their regulatory capital.
• Morningstar Credit Ratings has identified 28 CMBS loans, representing an allocated property balance of US$2.17bn, with exposure to stores that will close as part of Sears Holding Corp’s Chapter 11 bankruptcy filing (SCI 30 October). Sears’ departure is expected to be more detrimental to malls in secondary or tertiary locations where performance has already deteriorated, as these locations will be less desirable to prospective tenants.
• The Chapter 11 trustee has filed a third amended joint plan for Acis Capital Management and a notice confirming a court order that: conditionally approves its disclosure statement; schedules a combined hearing regarding final approval of the disclosure statement and confirmation of the plan; and sets related deadlines. The plan contains an injunction barring Highland Capital Management and its affiliates from liquidating the ACIS CLO 2013-1, 2013-2, 2014-3, 2014-4, 2014-5 and 2015-6 deals, except through reset transactions pursuant to the plan (SCI 2 November).
• In the latest development in the Fairhold Securitisation saga (SCI passim), Clifden’s permission to appeal the court order has been refused by the court of appeal on the basis that it had no real prospects of success (SCI 2 November). Meanwhile, correspondence has continued to be sent by or on behalf of Clifden to the issuer, the note trustee and other parties in the Fairhold Securitisation structure, premised on the assumption that acts done or purportedly done by Bowell and Coakley in their purported capacity as administrators are valid and effective. The issuer has consequently issued another application to the court, seeking further declaratory and other relief in order to put beyond doubt the effect of the order and to further restrain Clifden.
• The Acropolis Garden loan, securitised in the CSAIL 2017-C8 and CSAIL 2017-CX9 CMBS, is in payment default and headed for foreclosure. The cooperative housing corporation that owns the building is suing the borrower and property manager, alleging fraud and failure to remediate safety issues. For more on CMBS restructurings, see SCI’s CMBS loan events database.
• Analytics firm TheNumber has run the cashflows for Freddie Mac’s STACR 2018-DNA3 30-year securitisation through a custom credit option-adjusted spread model developed specifically to incorporate historical weather data, along with 24 different hurricane simulation models published by the National Oceanic and Atmospheric Association to estimate the impact of hurricanes on credit risk transfer deals. The firm found that there are no likely scenarios where a single event, or even a single bad year of weather, would result in any meaningful impact to bondholders in isolation (SCI 30 October).

Regulatory round-up

• The updated Delegated Regulation for the liquidity coverage ratio (LCR) has been published in the EU Official Journal, making STS designation compulsory for ABS exposures - in addition to various requirements relating to liquidity, rating and quality – in order to count as HQLA (SCI 2 November). The changes will be introduced on 30 April 2020 and there is no grandfathering included for the STS requirement.
• The European Council's position on capital requirements applying to banks with non-performing loans on their balance sheets has been approved (SCI 2 November). On the basis of a common definition of non-performing exposures, the proposed new rules introduce a prudential backstop, with different coverage requirements applying, depending on the classification of the NPLs as unsecured or secured and whether the collateral is ‘movable’ or ‘immovable’ (real estate).

Data

Pipeline composition by jurisdiction (as of 2 November)

Pricings
ABS accounted for half of last week’s pricings, across a range of jurisdictions and asset classes. RMBS and CLOs made up the rest of the prints.

Last week’s auto ABS new issues comprised €600m Auto ABS French Leases 2018, US$722m Bank of the West Auto Trust 2018-1, US$250m Foursight Capital Automobile Trust 2018-2, Sfr280m Swiss Car ABS 2018-2 and US$1.25bn Toyota Auto Receivables 2018-D Owner Trust. The other ABS pricings consisted of US$613.14m AASET 2018-2 Trust, US$100m DRB Capital Securitization Series 2018-A and US$322.3m World Financial Network Credit Card Master Note Trust series 2018-C.

£600m Finsbury Square 2018-2, €951m Saecure 16, A$1bn Series 2018-1 REDS EHP Trust and £293m Together Asset Backed Securitisation 2018-1 made up the RMBS pricings.

Among the new issue CLOs were US$474m Cent CLO 28, US$602m Golub Capital BDC CLO III and US$508m THL Credit Wind River 2018-3. Finally, the US$408m OHA Credit Partners XI CLO was refinanced.

BWIC volume

Source: SCI PriceABS

Conference
SCI’s 4^th Annual Marketplace Lending Securitisation Seminar is being held on 14 November, at 250 West 55^th Street, New York. Hosted by Arnold & Porter, among the topics that the event will explore are how new technologies are impacting the ABS market, how marketplace ABS structures have evolved and relative value opportunities across the asset class. Keynote speakers are Senator Christopher J Dodd and Congresswoman Carolyn Maloney. Click here for more information and to register.

Capital Relief Trades

Leveraged loan CRT prepped

Risk transfer sector developments and deal news

Deutsche Bank is believed to be readying a leveraged loan capital relief trade for 4Q18. According to SCI’s capital relief trades database, this would be the German lender’s first leveraged loan transaction.

Deutsche Bank has been one of the most active issuers this year, having issued a corporate deal and an SME deal from the CRAFT and GATE programme respectively. A trade finance transaction from its TRAFIN programme is also anticipated this quarter. 

Another German bank, Nord LB, is also understood to be prepping a shipping CRT for 4Q18. Nord LB issued its first shipping CRT last year from the Northvest programme, although the transaction was a mixed portfolio comprising aircraft, SME, infrastructure and renewables loans (SCI 20 December 2017).   

Structured Finance

Housing practice pinched

Company hires and sector developments in structured finance

Fund launch

Trium Capital is partnering with Ellington Global Asset Management to launch the Ellington Trium Alternative Credit UCITS, a long/short credit UCITS fund. The fund is set to be launched 4Q18 and will leverage Ellington’s expertise in RMBS, CMBS, CLOs and corporate credit relative value strategies.

ILS

Nephila Climate has hired Ariane West as director of structured finance. West joins from Walkers Bermuda where she was partner for two years.

US

AE Industrial Partners has hired Marc Baliotti as senior md. Baliotti has more than 20 years of structured credit experience, most recently as md at GSO Capital/Blackstone. AE Industrial has also announced that it will expand its investment solutions to include new structured credit offerings.

DBRS has hired Chris Bushart to its New York office as svp, global business development. He will work with Mary Potthoff, md, global business development in increasing the ratings agency’s CMBS footprint. Most recently Bushart was head of investor relations for North American structured finance at Fitch.

Jones Walker has expanded its housing industry team by hiring all of the members of Liles & Rushin. Effective 19 November 2018, two new partners, Kelly Rushin Lewis and Brandon Hughey, along with their team of housing professionals, will join Jones Walker's new Birmingham office. The firm also announced that Lewis will be the new leader of the firm's national housing industry team. Lewis focuses on all aspects of the representation of lenders and investors in connection with affordable housing transactions and has experience in secured and unsecured transactions, structured financing transactions, and multi-state transactions. 

Structured Finance

Global head hired

Company hires and sector developments in structured finance

Dechert has hired Cameron Mitcham as a partner in London at the firm’s global finance practice, joining from Allen & Overy. Mitcham will work with the CLO team and securitisation practice, acting for managers, arrangers, originators, investors and other deal parties in CLO transactions.

ING has hired Stefan Rolf as global head of securitisation for wholesale bank lending. Based in Frankfurt, he will be part of the lending management team and focus on strengthening ING’s securitisation franchise. Rolf is currently head of asset-backed securitisation at Volkswagen Bank treasury and will join ING on 1 January 2019.

Structured Finance

CRE platform acquired

Sector developments and company hires in structured finance

Acquisitions

AXA Investment Managers has expanded its global debt platform through the acquisition of Quadrant Real Estate Advisors. This includes an acquisition of Quadrant’s investment team and management of US$9.4bn of US commercial real estate loan mandates. As part of the transaction, 24 members of Quadrant, including five of the founding members, will join AXA IM - Real Assets. Quadrant will continue to manage various commercial real estate debt strategies in the US, Great Britain and Ireland. The team will be based in Atlanta.

Australasia

Bank of America Merrill Lynch has hired Tim Richardson as head of Australia and New Zealand securitisation origination. He will be based in Sydney and is due to start in December.  Richardson joins the firm’s global mortgages team from a position at Deutsche Bank and will report to Greg Petrie in London and local head of FICC Mark Elworthy.

DOJ complaint

The US Department of Justice has notified UBS that it intends to file a civil complaint against it related to UBS's issuance, underwriting and sale of legacy RMBS. UBS anticipates that the complaint will seek unspecified monetary civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) regarding RMBS transactions that date back to 2006 and 2007. The bank says that the DOJ’s claims are not supported by the facts or the law, and it will contest any such complaint vigorously because it was not a significant originator of US residential mortgages and suffered massive losses on its investments in US mortgage-related assets when the housing market collapsed. It adds that it fulfilled its disclosure obligations to RMBS investors and believes that FIRREA limits any penalty that the DOJ may seek to obtain to losses incurred by federally insured financial institutions, which were a fraction of the overall losses on RMBS certificates sold by UBS.

NPL ABS

Banca Popolare del Lazio has transferred €120.5m in non-performing loans to a securitisation vehicle called Pop NPLs 2018. The senior notes are expected to be guaranteed under the GACS scheme.

Fund launch

Springrowth has announced the first close of the Diversified Enterprises Credit Fund (DECF), the first parallel lending vehicle to be launched in Italy. The DECF is a closed-ended vehicle with an eight-year investment term which has received €210m in commitments from a broad group of Italian and international institutional investors. The European Investment Fund (EIF) and the Cassa Depositi e Prestiti (CDP) acted as anchor investors in this initiative to bring capital market funding to Italian SMEs in parallel with the banking sector.

Structured Finance

CLO investor poached

Company hires and sector developments in structured finance

Acquisitions

LibreMax Capital has entered into an agreement to acquire Trimaran Advisors and certain affiliated companies (Trimaran) from KCAP Financial. Following the close of the transaction, Trimaran’s cio and head of its CLO platform, Dominick Mazzitelli, will continue to lead the business, supported by the existing management team. Trimaran currently manages six CLOs with approximately US$3bn AUM and the transaction is subject to customary closing conditions but is expected to close by year end.

Motion to dismiss

The trustee for the ACIS CLO 2013-1, 2014-3, 2014-4, 2014-5 and 2015-6 deals has filed proofs of claim on behalf of the secured parties in the Acis Capital Management bankruptcy case (SCI 2 November). Unless otherwise instructed prior to the close of business on 13 November, it does not intend to vote, object or submit pleadings with respect to the plan. However, Highland Capital Management has filed a motion for an order dismissing the debtors' Chapter 11 cases or, as an alternative, converting the cases to Chapter 7 for Cause. A hearing on the motion to dismiss has been scheduled to commence after the hearing on confirmation of the plan on 11 December. 

Partnerships

Texel Finance has entered into a new credit insurance facility with Liberty Specialty Markets (LSM), part of Liberty Mutual Insurance, to target key emerging opportunities in the structured finance and specialist financing sectors. The facility will offer cover of up to US$100m for tenors of up to 10 years on any single risk or transaction. Opportunities to be targeted include providing insurance via more structured arrangements, such as tranched credit portfolio risk transfer, and covering more specialist financial exposures. Clients will be both traditional users of credit insurance, such as banks, as well as other less traditional buyers of it, such as asset managers and other financial intermediaries, who are increasingly looking to find new solutions for limit management and regulatory capital relief.