Essent Guaranty has priced the first insurance-linked note (ILN) - a US$253.2m deal dubbed Radnor Re 2023-1 - that the market has seen in almost a year.

The last deals in the ILN market were a US$201m trade from Arch and a US$238m deal from Essent, both of which were priced in September 2022.

Radnor Re 2023-1 consists of four tranches, which refer to a pool of 133,879 fully amortizing first lien fixed and floating rate mortgages.

There is a high BB US$89.6m M1A tranche, a low BB US$74m M1B, a B-rated US$70.1m M2 and a B-rated US$19.5m B1.

This latest trade represents the ninth ILN from Essent.

Only four ILNs came to market in 2022, compared to 14 in 2021 and 12 in 2020. Moreover, deal sizes were significantly smaller than in previous years.

The ILN market shut down due to much greater execution costs as spreads rose. Echoing developments in the GSE CRT market, mortgage insurers turned increasingly to the reinsurance market to offset risk.

Some US$3.4bn was priced in the reinsurance market across 16 deals last year. Reinsurance went from being just 25% of the mortgage insurance risk transfer market to 75%.

Leading reinsurer Guy Carpenter predicts that there will be more issuance in the ILN market in the second half of the year, but deal size will remain constrained. It believes total issuance will be less than US$2bn.

Simon Boughey