Freddie Mac: ACIS flows to dip in 2022 but “ample” reinsurance opportunities remain

Mortgage reinsurers can still expect to see “very substantial” flows and “ample opportunities” in 2022 even if the record Agency Credit Insurance Structure (ACIS) volumes issued by Freddie Mac this year fail to be repeated as the refinancing boom fades, Mike Reynolds has told The Insurer TV.

This year has seen “historic” mortgage acquisition volumes driven by low rates and large refinances, both of which helped to push what Reynolds, who serves Freddie Mac as vice president of credit risk transfer, said have been “historic ACIS volumes” of close-to $6bn.

But that trend is unlikely to continue, Reynolds said.

“Going forward, I do expect there to be overall lower aggregate insurance placement although there may be other issuers in the marketplace that were not so active in 2021 that are active in 2022,” said Reynolds.

“I think probably there are still going to be…ample opportunities for the reinsurance market [next year],” he added.

The ACIS program, which was established in 2013, allows Freddie Mac to obtain policies that transfer a portion of the credit risk associated with its Structured Agency Credit Risk (STACR) debt note reference pools to (re)insurers around the world.

The program has increased substantially since its early days, with a growing number of reinsurers involved.

Speaking to The Insurer TV, Reynolds said 34 reinsurers have participated in ACIS this year - an all-time high.

“If you look back throughout history, that makes it about 50 unique reinsurer names who have participated in the program,” Reynolds said.

The executive also highlighted that an increasing proportion of the reinsurers participating in the program are international, with 19 of those involved this year from outside the US, another record high.

And Reynolds remains positive for the program’s future prospects, as well as its ability to bring in additional reinsurance support.

“We think the outlook for market growth is definitely there and we continue to have dialogue and engage with the reinsurers and onboard them through our counterparty process,” Reynolds said.

Reinsurers shake off pandemic worries

Reflecting on the impact of the pandemic on Freddie Mac’s reinsurer panel, Reynolds said the group held up well despite concerns.

Early on in the pandemic during 2020’s second quarter, Reynolds said questions were asked about the potential impact, the extent of job losses and possible carrier delinquencies.

“At the beginning of Q2 in that April 2020 timeframe, there was definitely a pause as insurers were trying to understand their exposures, not only in US residential but in other asset classes as well,” he said.

“By the end of Q2, reinsurance markets were ready to execute deals, at least enough of them to make it viable for us as an issuer to come back to market,” said Reynolds.

“And throughout the course of 2020 and 2021, we’ve actually seen significant growth in reinsurers coming to our ACIS program,” he added.