OLDWICK, New Jersey – (COMMERCIAL THREAD) –AM Best revised its market segment outlook for the US private mortgage insurance (PMI) sector from stable to negative due to improving economic and housing market conditions; however, the risk of a slowdown remains due to the current and potential variants of COVID-19.
The Best Markers Segment Report, “Market Segment Outlook: US Private Mortgage Insurers,” notes that the housing market has remained strong, with record levels of home price growth. Low mortgage rates and strong demand for housing, especially in less densely populated areas, combined with a tight supply of housing for sale, fueled the surge in house prices. These factors have reduced the likelihood that private mortgage insurers will have to cover losses as borrowers are in a much stronger equity position. Delinquency and forbearance numbers have also improved since the peak in May 2020. The majority of COVID-19-related forbearance plans ended in September 2021 and AM Best expects options to Loss mitigation help minimize foreclosure related foreclosures.
The capital position of private mortgage insurers remains strong, with new insurance underwritten amounting to $ 306.7 billion and in-force insurance totaling $ 1.3 trillion in the second quarter of 2021. New insurance PMI underwritten is expected to reach the highest annual total since the record. of approximately $ 600 billion in 2020. Insurance in force only increased 3.4% from the end of 2020 due to a decline in persistence caused by an increase in l refinancing activity.
According to the report, the average loss ratio fell to 10.9% in the first half of 2021, from 34.4% at the end of 2020, while the combined ratio improved to 34.3% from 57.2 %. Private mortgage insurers continue to shift risk to the traditional reinsurance market, and the mortgage insurance securities market remains strong. Until September 21, 2021, approximately $ 4.5 billion of risk has been transferred to the capital market via mortgage insurance-related securities, approaching the $ 4.6 billion recorded in 2019 and $ 4.7 billion. dollars in 2020.
Overall, the PMI sector remains able to withstand potential increases in credit losses due to the COVID-19 pandemic.
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AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Based in the United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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