Sector developments and company hires

EIOPA has published a consultation paper in response to the European Commission’s call for advice (CfA) to the joint committee (JC) of the European Supervisory Authorities (ESAs) regarding a review of the securitisation prudential framework (SCI 28 October 2021). Under the CfA, the Commission sought the assistance of the JC to assess the recent performance of the rules on capital requirements (for banks and (re)insurance undertakings) and liquidity requirements (for banks), relative to the framework’s original objective of contributing to the sound revival of the EU securitisation market on a prudent basis.

Regarding the insurance sector, the calibration of capital requirements for investments in securitisation tranches was revised (with the adoption of COM Delegated Regulation (EU) 2018/1221) to reflect the new securitisation framework in the banking sector and creating a specific framework for STS securitisation. The stress factors were modified by replacing the previous categorisation according to type 1, type 2 and resecuritisations with the new classification of senior STS, non-senior STS, non-STS and resecuritisations.

For the purpose of the review of the framework, the Commission would need to receive the JC’s advice no later than 1 September 2022. As such, EIOPA has launched a data collection exercise that includes a questionnaire, in order to gather information that will be included in the final advice.

Among the stakeholder questions included in the consultation paper is: do you have any comment on the comparison of the securitisation capital charges with other asset classes with similar characteristics? Another question is: do you have evidence that the current calculation for capital requirements for securitisation (senior STS, non-senior STS and non-STS) is not proportionate or commensurate with their risk?

EIOPA says it will consider the feedback received from stakeholders before submitting a final proposal for adoption.

In other news….

Commingled resecuritisation fees introduced

Fannie Mae and Freddie Mac have introduced resecuritisation fees for new issuances of commingled securities. The fee is designed to align with the cost of required capital for Fannie Mae guarantees of Freddie Mac UMBS collateral and Freddie Mac guarantees of Fannie Mae UMBS collateral under the Enterprise Regulatory Capital Framework (ERCF). 

Effective from 1 July 2022, each GSE will begin charging a new fixed upfront fee of 50bp to create certain Supers and REMIC securities that have the other GSE’s UMBS collateral underlying those securities. The fee is intended to be charged at the time of settlement of the security, although the GSEs reserve the right to charge this fee post-settlement, if a final review of the collateral demonstrates that commingled securities are present.

The charge to create Fannie Mae and Freddie Mac Supers and REMIC securities that include solely Fannie Mae and Freddie Mac collateral respectively remains unchanged, as no additional capital charge applies to such collateral.

EMEA

PCS has welcomed global ABS expert, Ashley Hofmann, to its market outreach team this week. Hofmann has been active in the securitisation market for 12 years, and has extensive experience in managing securitisation conferences, awards, and client relations. Having helped organise events and marketing campaigns for both GlobalCapital and IMN, PCS hopes her skillset will help bolster its online presence and support its European Symposia Series.

North America

John Duda has been appointed as the new head of ILS development and capital management products at the independent specialist (re)insurance broker, Miller. Joining from Markel, Duda brings extensive expertise to the firm having previously led Markel’s retrocessional portfolio management team and assisted in the launch of its retrocessional ILS fund, Lodgepine Capital Management. The firm hopes Duda will help support its broking and ILS operations in Bermuda, where he will focus on defining and building systems and analytics tools, as well as supporting business development strategies. Duda marks the latest hire in the firm’s expansion into Bermuda and ILS following the launch of its Bermuda platform in early 2021, which included the hires of head of Bermuda, Charlie Simpson, and head of ILS, Erik Manning.

Reed Smith has announced the addition of new finance and tax partner, Todd Anderson, who joins the firm’s New York office. Formerly, Anderson worked as founder and managing member of Anderson Tax & Finance Law, and brings extensive experience across real estate finance, securitisation, and loan origination to the new role.