Mortgage guaranty report

1977-2006 Experience
2006 Premium Earned

Mortgage guaranty insurance provides protection to lenders against default by borrowers who initially have less than 20 percent equity interest in the mortgaged property.  This form of insurance is designed to stimulate home ownership by giving consumers, with a down payment of less than 20 percent, access to credit markets.

Because mortgage guaranty insurance can have large loss fluctuations, over the years and from state to state, the Department of Insurance, Financial Institutions & Professional Registration has been collecting data on this business for more than 30 years to monitor this market.  Each year, the Department of Insurance, Financial Institutions & Professional Registration directs mortgage guaranty writers in Missouri to file loss-ratios of their residential and commercial business for both Missouri and countrywide.  This report compares the performance of these insurers in Missouri and countrywide, for years 1977 to 2006.

In 2006, insurers writing residential guaranty insurance in Missouri reported a premium earned of $95.9 million and losses totaling $44.6 million in Missouri.  The true loss ratio (losses paid + change in outstanding reserve + change in IBNR reserve divided by premium earned) is only 55.9 percent, or well below the usual levels for most lines of property and casualty insurance.  For 30 years combined, the loss ratio is 36.6 percent in Missouri, but 45.4 percent countrywide.

The volume of the residential mortgage guaranty market in Missouri steadily has increased.   For the year ending 2006, 16 companies wrote residential mortgage guaranty insurance in Missouri. Commercial mortgage guaranty activity has ceased in Missouri, with no premiums and/or losses reported since 1999.

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 upon each company’s data.  The charts and graphs in Section I utilize data submitted by all mortgage guaranty insurers writing in Missouri for 1977 through 2006.  Section II is based on companies actively writing in Missouri for calendar year 2006.  Section III ranks mortgage guaranty insurers on their 2006 data by premium earned.

Any questions regarding this report should be addressed to the Statistics Section, Department of Insurance, Financial Institutions & Professional Registration, P.O. Box 690, Jefferson City, Missouri 65102-0690.  Also, additional copies of this report can be received by sending a written request, along with payment of $35 per copy, to this same address.  The Department of Insurance, Financial Institutions & Professional Registration also has a web site located at www.difp.mo.gov.