Moody’s Downgrades Mortgage Insurer RMIC

NU Online News Service, Nov. 17, 3:12 p.m. EDT

Moody's Investors Service has downgraded Republic Mortgage Insurance company’s (RMIC) insurance financial strength rating to Caa2 from B1, citing continued deterioration at the troubled company.

Moody’s also downgraded the senior debt of RMIC’s parent company, Old Republic (ORI), to Baa2 from Baa1 due to the potential financial strain at ORI, “particularly if a regulatory takeover of the mortgage-insurance operation triggers a technical default and early redemption of ORI’s senior debt.”

Regarding RMIC, Moody's says the downgrade reflects the firm's weakened credit profile and lack of parental support. “The rating agency believes that RMIC is likely to breach the North Carolina $1.25 million minimum regulatory capital requirement over the coming quarters and that continued high claims are threatening its liquidity position,” Moody’s says.

According to Moody’s, RMIC had $100 million of surplus and $1.25 billion in liquid assets at Sept. 30, 2011, and has been paying about $215 million of claims per quarter for the last year.

“Such deterioration is expected to result in the implementation of a runoff plan that would involve the settlement of claims with both a cash and a deferred component to preserve liquidity,” the rating agency says.

Moody's believes RMIC should be able to ultimately cover all claims out of its current resources and projected premium income, but says “substantial uncertainty and downside risks remain due, in part, to the continued weakness in the housing sector.”

In August, Moody’s noted that ORI stated it would not contribute additional capital to help RMIC, and that RMIC’s two major counterparties—Fannie Mae and Freddie Mac—said the company is no longer an approved insurer. Moody’s also said at the time that the company’s regulator is unwilling to allow it to write new business.

In an Aug. 3 notice on its website, RMIC says, “We wish to inform you that Republic Mortgage Insurance Company will discontinue writing new commitments for insurance effective Aug. 31, 2011. RMIC has been operating pursuant to a waiver of minimum state risk to capital ratio requirements which expire at the end of August.”

Moody’s said in August that troubles at RMIC and at PMI Mortgage Insurance Copmay could present opportunities for better-capitalized competitors if they could demonstrate the ability to maintain regulatory compliance.

Later in August, Fitch Ratings affirmed ORI’s ‘A’ insurer financial strength ratings, stating that it “views the potential capital impact of a runoff of Republic Mortgage Insurance Company as limited to RMIC’s $445.1 million capital base, given management’s assertion that it would be managed within those constraints.”

About the Author
Phil Gusman, PropertyCasualty360.com

Phil Gusman, PropertyCasualty360.com

Phil Gusman is Managing Editor of PropertyCasualty360.com. Prior to joining National Underwriter in 2008, he was Editor of Insurance Advocate. Gusman has also served as Associate Editor of Crackdown!, an insurance fraud publication, and Assistant Editor of Empire State Report, which covers New York politics. He graduated in 2002 from Plattsburgh State University in New York. Gusman may be reached at pgusman@summitpronets.com. Follow him on Twitter: pgusman and PC360_Markets

Comments

Resource Center

View All »

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

Drug and Alcohol Testing Requirements

In this two-part series, NBIS Risk Management team will break down the requirements to assist...

Why Cyber Liability is Essential for Human Service Organizations

For traditional low-tech operations, information is often compromised in ways that don't involve technology. Access...

A Solution for Large Commercial Habitational Accounts

6 Reasons to place your LARGE Habitational Accounts with Dauntless.

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.