Uncertain world means being tough upfront

by Mackenzie McCarty28 May 2012

Mortgage insurers are coping with volatility in the global economy by being extra careful of the risks they are willing to take on to ensure there are 'no surprises'.

Speaking with Australian Broker, QBE LMI chief executive Jenny Boddington said that having taken on the group's top job in March this year, she and the group were coping with the risks of an uncertain world.

"The only things you can do in such an uncertain world is to work out what the bands of realistic outcomes are - what could happen in terms of the downside, what could happen in terms of the upside - and make sure that your business is structured to cope," she said.

Boddington said although Europe was dominating headlines, the Australian economy was in a very good position, although it was heavily hinged on the growth of the Chinese economy. She said that Europe's affects were more indirect, on financing and on consumer confidence.

However, she said that the group cannot with any confidence say what the rest of 2012 will entail.

"And I don't think that anybody else can. We factor it all into our book, and into the parameters of the loans we are supporting," she said.

Boddington said that with more uncertainty in the economy, the mortgage insurer had to be extra sure that the capacity for the borrower to repay the loan as going to be there.

"It's can't just be thin, it's got to be solid, so if times do get more difficult they [borrowers] are not going to be under stress and have to give up their homes," Boddington said.

"We have a firm belief as a company that there should be no surprises. So the philosophy we have in regard to that, is be very clear on the kind of business that we want to write at the front end; what risk we are comfortable with, and the processes we need to make sure the risk is appropriate."