OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best is requesting comments from market participants in the insurance industry and other interested parties on the draft of a new criteria procedure, “Evaluating Mortgage Insurance.”
The draft criteria procedure focuses on A.M. Best’s approach to: 1) rating mortgage insurers and 2) assessing the risk charge associated with insurance-based credit risk transfer initiatives by the two government-sponsored enterprises (GSEs), Freddie Mac and Fannie Mae.
Mortgage insurance protects mortgage lenders by ceding a portion of the mortgage risk from lenders to insurers, thus providing an added layer of credit protection should the homeowner default. The draft criteria procedure provides insight into the information requirements, key rating considerations, risk modeling and surveillance activities that generally will be applied by A.M. Best when rating mortgage insurers.
In the risk-sharing programs discussed in this draft criteria procedure, the GSEs compensate (re)insurance companies for sharing in the mortgage credit risk undertaken by the GSEs. Specifically, these programs are designed to transfer a portion of the credit risks associated with a reference pool of mortgage loans from the GSEs to the (re)insurance market. The draft criteria procedure outlines the process by which A.M. Best will evaluate this risk within the framework of A.M. Best’s capital model, Best’s Capital Adequacy Ratio (BCAR).
This draft criteria procedure is available at www.ambest.com/ratings/methodology.
Written comments should be submitted by e-mail to firstname.lastname@example.org no later than May 1, 2017. When submitting comments to the methodology in-box, commenters have the option of requesting anonymity, but not confidentiality. All comments received through the methodology in-box that do not request anonymous treatment will generally be published in their entirety, with attribution to the author/sender at the time of implementation of the criteria procedure.
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