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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 08, 2017 09:12 AM (EDT)
U.S. mortgage insurance exposures, which generally have been a low penetration area for reinsurance companies, have now become very pronounced in reinsurers’ lines of business, and A.M. Best expects to see more of the U.S. government-sponsored enterprises’ mortgage risks in the reinsurance market, according to A.M. Best’s annual special report on the global reinsurance industry.
The Best’s Special Report, “Down But Not Out: Reinsurers Look to Reposition Amid Market Disruption,” explores the state of the industry as a whole and in specific markets, as well as emerging trends such as U.S. mortgage exposure in reinsurance. Key factors driving this phenomenon include: a) the mandate by the Federal Housing Finance Agency requiring the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to cede more of their pooled loans to the private sector; b) soft market conditions in the property/casualty reinsurance sector, driven by falling rate-on-line on property catastrophe exposures and competition from the alternative capital sector; and c) current U.S. housing pricing conditions, which likely has contributed to increased demand.
As a result, supply and demand conditions have created a favorable outcome with reinsurers being the beneficiaries of the insurance-reinsurance transactions of the GSEs’ U.S. mortgage credit risk transfer program. As of July 30, 2017, Freddie Mac and Fannie Mae have transferred a combined $12.3 billion in limits or risk in-force to the reinsurance sector.
The report section also takes a closer look at the GSEs’ mortgage credit risk-transfer programs, and details A.M. Best’s approach to calculating capital charges for these programs. In addition, A.M. Best’s recently released draft criteria, “Evaluating Mortgage Insurance,” provides a thorough framework for estimating potential losses and capital charges for A.M. Best-rated reinsurers’ involved in the GSEs’ reinsurance credit risk transfers. The updated draft criteria procedure is available in the methodology section of A.M. Best’s website.
Other highlights from this year’s global reinsurance report include:
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=265357 .
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.