By Al Yoon and Leslie Scism | The Wall Street Journal
U.S. government-controlled mortgage-finance company Freddie Mac FMCC +0.90% for the first time is tapping the reinsurance industry to cover potential losses on loans that it guarantees, expanding an effort to share its risks with private investors.
Freddie Mac on Tuesday said that it bought an insurance policy from a reinsurance unit of Bermuda-based Arch Capital Group Ltd. ACGL -0.70% to cover up to $77.4 million of credit losses on a pool of loans it acquired in the third quarter of 2012.
The transaction with Arch Reinsurance Ltd. comes as the reinsurance industry is seeking new ways to deploy capital as hedge funds, pension funds and other big investors have been plowing money into the sector as a way to earn higher yields than they can get in many more traditional areas, among other potential benefits.
