Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Bellemeade Re 2020-3 Ltd.

In November 2020, the Company’s first-lien U.S. mortgage insurance subsidiaries entered into an aggregate excess of loss reinsurance agreement with Bellemeade Re 2020-3 Ltd. (“Bellemeade 2020-3”), a special purpose reinsurance company domiciled in Bermuda. The Bellemeade 2020-3 agreement provides for up to $451.8 million of aggregate excess of loss reinsurance coverage at inception in excess of $173.8 million of aggregate losses for new delinquencies on a portfolio of in-force policies primarily issued from June 1 through August 31, 2020. The coverage amount decreases over a ten-year period as the underlying covered mortgages amortize.

Bellemeade 2020-3 financed the coverage through the issuance of mortgage insurance-linked notes in an aggregate amount of approximately $418.2 million to unrelated investors (the “Notes”) and an additional $33.7 million capacity was provided directly to Arch MI U.S. by a separate panel of reinsurers. The maturity date of the Notes is October 25, 2030. The Notes will be redeemed prior to maturity upon the occurrence of a mandatory termination event or if the ceding insurers trigger a termination of the reinsurance agreement following the occurrence of an optional termination event. All of the proceeds paid to Bellemeade 2020-3 from the sale of the Notes were deposited into a reinsurance trust as security for Bellemeade 2020-3’s obligations. At all times, funds in the reinsurance trust account are required to be invested in high credit quality money market funds.

WatfordIn November 2020, the Company announced a revised definitive agreement under which it will acquire, in partnership with funds managed by Warburg Pincus LLC (“Warburg Pincus”) and Kelso & Company (“Kelso”), all of the common shares of Watford for $35.00 per share or approximately $700 million. The transaction is expected to close in the first quarter of 2021 and remains subject to customary closing conditions, including regulatory and shareholder approvals. Under the merger agreement, the Company assigned its current interests and obligations in Watford to a newly formed subsidiary which will acquire the outstanding shares of Watford. At closing, the Company will own approximately 40% of Watford, Warburg Pincus and Kelso will each own approximately 30%.