NAB in proposed LMI tender with US insurer

by Ryan Smith08 May 2017
US mortgage insurance giant Arch Capital Group is ramping up its Australian presence in a bid to win more business in the country’s lenders' mortgage insurance (LMI) market.

The Australian Financial Review reports that Arch is considering a request for proposal by National Australia Bank to provide its LMI. Currently, the bank’s LMI is provided by Genworth Mortgage Insurance Australia for broker-originated loans and QBE Insurance for bank-originated loans.

According to the AFR, the process is still “in the preliminary stages”.

Arch already has a presence in Australia, supporting Westpac’s LMI operations by reinsuring riskier loans, the AFR reported. And now the US giant is said to have been granted a local license and plans to ramp up its business in the country.

There’s one big customer the US company won’t be able to touch for a few years, though. Genworth managed to lock down its relationship with Commonwealth Bank of Australia last year, renewing its contract for a further three years, according to the AFR.

COMMENTS

  • by TMAC 8/05/2017 9:07:17 AM

    Very happy that the current duopoly appears to be coming to an end. Unfortunately any discount in LMI premiums is likely to go straight into the banks pocket and not passed onto to the borrower. Maybe NAB may stand by its current mantra "More Give Less Take" or am I just kidding myself!

  • by Tony 8/05/2017 10:57:04 AM

    Another group of thieves moving in!
    The enormous profits these MI providers generate from borrowers who can least afford it is disgraceful.
    With such a small default rate the lenders should take the risk themselves at a much cheaper rate.

  • by Dave Robinson 8/05/2017 1:09:04 PM

    OMG why do people who don't understand the LMI market feel the need to comment. Firstly the duopoly (as it has been put) is not coming to an end. If you read the AFR story in full and relied less on AB for the information you would have a far better idea of what is going on and just how much smaller the LMI market looks to be heading.

    And yes they do make profits but have you seen the last set of financials? Mmm that's what I thought. LMI is a cyclic business and it's hitting the downward part of the cycle right now, hence Arch are coming in to take over the LMI space. The default rate is about to climb and you should be asking yourself "why don't the lenders do their own LMI?" and the answer is that there is no money in it. Banks are risk managers and the risk with LMI is far too great for them.

    I hope that helps clear up some of the misconceptions you may have.