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Moody’s predicts steady year for LMI groups

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Moody’s Investors Service expects to maintain the ratings of insurers offering lenders’ mortgage insurance (LMI) over the next year.

It says the companies are well capitalised, have low and stable loss ratios and retain strong market positions.

But it notes the portfolios of Genworth, QBE LMI and Westpac LMI are concentrated relative to global peers, which exposes them to volatility from weakness in a particular region or single client.

Genworth and QBE LMI account for about 85% of the local market.

Moody’s VP and Senior Credit Officer Ilya Serov says the companies exceed regulatory capital requirements and have relatively low loss ratios that will offset risk from economic slowdown.

He told the lenders’ mortgage insurers have adopted more conservative underwriting practices since 2008, so the quality of their portfolios will increase.

As a result, loss ratios should remain low and may even improve.

Although Sydney house prices have risen recently, Mr Serov says excessive credit growth or a loosening of lending criteria is not fuelling the rise.