September 02, 2009

Department of Insurance releases the 2008 Mortgage Guaranty Report

This years mortgage guaranty report reveals that the impact of the housing crisis on residential mortgage insurers intensified in 2008. Mortgage guaranty carriers experienced the largest losses in the 30 years that the DIFP has been collecting data. Mortgage guaranty insurance is also known as private mortgage insurance (PMI).

The mortgage guaranty insurance industry has experienced tremendous growth over the last 30 years. In 1979, mortgage insurance on residential loans equaled $296.3 million. By 2008, it had grown into a $6 billion dollar industry nationwide . In Missouri in 2008, mortgage guaranty insurers earned $113.6 million in premium.

Missouri mortgage guaranty insurers incurred net losses for the second year in a row. In 2008, insurers incurred losses of $173.1 million, equal to 152.2 percent of premium earned in that year. Nationally, these same insurers incurred losses equal to 228.7 percent of premium. This represents an increase in losses compared to the prior year - in 2007, Missouri losses equaled 114.4 percent and 127.9 percent nationally.

Mortgage guaranty insurance is subject to regulatory and capital requirements not typical of other insurers. The industry is structured to weather periods of catastrophic losses associated with turmoil in the housing or financial sectors.

Last year was the first year since 1983 that overall levels of contingency reserves were drawn down to cover losses. Contingency reserves are special reserves that mortgage guaranty insurers are required to maintain under Missouri law. 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 relatively modest $29.1 million, compared to $113.6 million of premium earned.

The full report is available for download at this link:

About the Missouri Department of Insurance, Financial Institutions & Professional Registration

The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department's seven divisions work to maintain consumer confidence by examining and monitoring industries and professions and by establishing coherent and evolving policies. DIFP works to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.

For further information, contact: The Public Information Office at (573) 751-2562