2010 Mortgage Guaranty Insurance Report

2010 Mortgage Guaranty Insurance Report

Summary

• This year’s residential mortgage guaranty report reveals that the impact of the housing crisis on residential mortgage insurers may have subsided somewhat in 2010, though insurers still incurred losses in excess of premium. Insurers paid out over $146 million in 2010, the largest annual payments since the DIFP began collecting such data over 30 years ago.  However, much of this amount represents payments for losses that occurred in prior years.  The amount of incurred losses, or the amount that insurers expect to eventually pay out on claims that occurred in a year, significantly declined between 2009 and 2010.
• Paid losses in Missouri increased substantially over the prior year, and rose to the highest level in the over 30 years since the DIFP began collecting data.  In 2010, insurers paid out over $146 million to cover residential loan defaults.  Nationally, these same insurers paid losses totaling $10.5 billion, and amount that excludes payments from insurers that do not operate in Missouri.
• Mortgage guaranty insurers incurred net losses for the third year in a row.  In 2008, insurers incurred losses of $173.1 million, equal to 152.2 percent of premium earned in that year.  This percentage declined to 145.7 percent in 2009, and again to 107.7 percent in 2010.  Incurred losses in part represent insurers expectations of how much they will eventually pay out on claims incurred during a year.  the amount of claim reserves, of money insurers set aside to cover such claims, declined by $46.8 million from the prior year. National loss ratios for these insurers declined from 228.7 percent in 2008 to 160.4 percent in 2010.
• Industry wide in 2008, contingency reserves were reduced for the first time since 1983.  Such reserves declined again in both 2009 and 2010. Contingency reserves are special reserves that mortgage guaranty insurers are required to maintain by statute.  They are equal to 50 percent of premium, and must be maintained for 10 years, but may be used to cover losses in excess of 35 percent of premium in a given year.  Contingency reserves covering Missouri losses in 2008 declined by a modest $29.1 million in 2008, but more substantially 2009 ($67.2 million) and 2010 ($55.6 million)
• Challenges in the real estate and housing markets also contracted the market for mortgage guarantee insurance, as evidenced by premium.  In 2008, mortgage guarantee premiums peaked at $113,6 million, but had declined to $92.2 million in 2010.

This report was compiled using information submitted by the insurance companies. While every effort is made to ensure accurate data, the accuracy of this report is dependent on each company’s data. Any questions about this report should be directed to the Statistics Section, Missouri Department of Insurance, Financial Institutions & Professional Registration, P.O. Box 690, Jefferson City, MO 65102-0690.

Additional copies of this report can be received by sending a written request, with payment of $35 per copy, to this same address.