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,

Phil Gusman,

Phil Gusman is Managing Editor of 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 Follow him on Twitter: pgusman and PC360_Markets


Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Unit used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

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.