Mortgage Insurance

Mortgage Insurance

Private mortgage insurance (PMI), also known as mortgage guaranty insurance, guarantees that, in the event of a default, the insurer will pay the mortgage lender for any loss resulting from a property foreclosure, up to a specific amount. PMI, which is purchased by the borrower but protects the lender, is sometimes confused with mortgage life insurance, a life insurance product that pays off the mortgage if the borrower dies before the loan is repaid. Banks generally require PMI for all borrowers with down payments of less than 20 percent of the home price. The industry’s combined ratio, a measure of profitability, deteriorated (i.e., rose) significantly in 2007 and 2008, reflecting the economic downturn and the subsequent rise in mortgage defaults, and remained at high levels through 2012. In 2014 the combined ratio fell to 70.2, the lowest level in the past 10 years.

 

Mortgage Guaranty Insurance, 2006-2015

($000)

Year Net premiums written (1) Annual percent change Combined ratio (2) Annual point change (3)
2006 $4,565,899 2.5% 71.0 -4.2 pts.
2007 5,192,104 13.7 129.0 58.1
2008 5,371,878 3.5 219.8 90.8
2009 4,564,406 -15.0 201.9 -17.9
2010 4,248,798 -6.9 198.4 -3.6
2011 4,242,340 -0.2 219.0 20.7
2012 3,965,896 -6.5 189.7 -29.4
2013 4,329,947 9.2 98.0 -91.7
2014 4,180,006 -3.5 70.2 -27.7
2015 4,681,917 12.0 58.1 -12.1

(1) After reinsurance transactions, excludes state funds.
(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.
(3) Calculated from unrounded numbers.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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Top 10 Writers Of Mortgage Guaranty Insurance By Direct Premiums Written, 2015

($000)

Rank Group/company Direct premiums written (1) Market share (2)
1 MGIC Investment Corp. $1,098,133 22.5%
2 American International Group (AIG) (3) 1,018,306 20.9
3 Radian Group Inc. 1,008,565 20.7
4 Genworth Financial Inc. 698,691 14.3
5 Essent US Holdings Inc. 368,930 7.6
6 PMI Group Inc. 235,589 4.8
7 Old Republic International Corp. 193,703 4.0
8 Arch Capital Group Ltd. (3) 134,841 2.8
9 NMI Holdings Inc. 114,211 2.3
10 Chubb Ltd. (4) 96 (5)

(1) Before reinsurance transactions, includes state funds.
(2) Based on U.S. total, includes territories.
(3) In 2016 AIG agreed to sell its mortgage guaranty business to Arch Capital Group Ltd.
(4) Chubb Ltd. data reflect the 2015 merger with Ace Ltd.
(5) Less than 0.1 percent.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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