Updated: May 30, 2021 11:12 AM
Bermuda’s market share of US mortgage insurers reinsurance has grown (Graph by Bill Zuill)
Bermudian-based insurance carriers are helping more Americans to become homeowners by providing the market with innovative mortgage solutions, the island’s re/insurance industry group said today.
The Association of Bermuda Insurers and Reinsurers said new analysis by the organisation shows that more than half of US mortgage reinsurance is backed by Bermuda’s reinsurance market.
Abir said reinsurance companies on the island provided increased capacity to US monoline private mortgage insurers in recent years, upping their share of reinsurance support from just under 30 per cent in 2016 to more than 50 per cent in 2020.
The organisation said the data underscores growing demand for diverse sources of global capital to support the US housing market, while reducing risks to US taxpayers.
Marc Grandisson, CEO of Arch Capital Group and chairman of Abir, said: “The Bermuda re/insurance market has long been known to provide peace of mind for Americans against natural catastrophe risks, including hurricanes, tornadoes and floods.
“Now, data shows the Bermuda market is playing an increasing role in helping Americans achieve the dream of home ownership.”
Abir said it analysed data from the US National Association of Insurance Commissioners filings for US monoline mortgage guaranty premiums ceded, and noted a growth trend relating to Bermuda market share of US monoline mortgage insurers reinsurance.
Beginning with 29.5 per cent in 2016, market share grew to 30.1 per cent in 2017, 33.7 per cent in 2018, 43.8 per cent in 2019, and 50.3 per cent in 2020.
Mr Grandisson said: “Mortgage insurance plays a critical role in making home ownership possible for many Americans.
“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.”
Abir said 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, Fannie Mae and Freddie Mac, and the credit risk transfer market, the organisation said.
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-capitalised, diversified reinsurers and capital markets providers.
Abir said its members stepped up over the last decade, providing significant capital to support the GSE CRT programmes, as well as the US real-estate market’s recovery and transformation broadly.
It said Bermuda reinsurers now support the US housing market in a variety of ways, regularly participating in traditional reinsurance arrangements, credit risk transfer transactions, and mortgage insurance linked notes 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 home ownership, Abir said.
It said global broker Aon estimates that CRT from GSEs to the Bermuda reinsurance market was approximately 60 per cent in 2020, further protecting US taxpayers.
Abir said 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, it said.
John Huff, CEO of Abir, said: “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.
“The Bermuda market is pleased to be part of the process in helping Americans from all walks of life benefit from home ownership.”
Marc Grandisson, chairman of Abir (Photograph supplied)
John Huff, chief executive officer of Abir (Photograph supplied)