A positive outlook for the mortgage insurance industry

by Candyd Mendoza14 Mar 2019

Low unemployment and a controlled core inflation rate buoyed the US private mortgage insurers (PMI) industry, according to AM Best’s stable market segment report.

The report revealed that the PMI industry’s did well in 2018, with positive results expected to persist in 2019.

“AM Best also expects the percentage of loans in default to continue its decline from previous years as the legacy insured loans continue to mature and become a smaller proportion of the entire PMI portfolio,” said AM Best in its announcement. “PMIs also have continued to cede more of their risk to the reinsurance market through various quota share and excess-of-loss programs, which serve as mechanisms to reduce potential losses in case of a market downturn.”

AM Best expects that the PMI industry will continue to issue mortgage insurance-linked securities (MILS) to give more risk to capital market participants. The industry ceded $4.15 billion to the capital market from 2015 to 2018, while it issued roughly $2.98 billion-worth of MILS in 2018.

“Overall, AM Best expects the mortgage insurance industry to continue its slight upward trajectory as the favorable market conditions continue; however, this could be hampered by future macroeconomic risk of a slowdown or recession and premium rate decreases as competition continues to increase among the PMIs,” the rating agency said.