iniesta13 Posted October 10, 2012 Share Posted October 10, 2012 Was looking at some mortgage insurers and saw that they were having combined ratios of below 70% pre-crisis, which strikes me as extremely low compared to other types of insurers. Sorry about this noob question, but what are the reasons behind the low combined ratios in this industry? Link to comment Share on other sites More sharing options...
handycap5 Posted October 10, 2012 Share Posted October 10, 2012 It is important to understand that MI is not a typical insurance product, but is more akin to assuming the junior portion of home mortgage. In years with low defaults, losses are much less than "premiums," which are much more analogous to assuming writing CDS. In years of high defaults, losses will exceed "premiums" many fold. A now deceased contributor to Calculated Risk website described the mortgage insurance industry in great detail prior to the financial crisis. I recommend you review her writing. Link to comment Share on other sites More sharing options...
iniesta13 Posted October 10, 2012 Author Share Posted October 10, 2012 Thanks a lot, handycap5. This is really helpful. Link to comment Share on other sites More sharing options...
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