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Fitch Publishes Mortgage Ins. Rating Criteria Exposure Draft
January 4, 2017 / 6:06 PM / a year ago

Fitch Publishes Mortgage Ins. Rating Criteria Exposure Draft

(The following statement was released by the rating agency) CHICAGO/SYDNEY, January 04 (Fitch) Fitch Ratings has published an Exposure Draft proposing changes to its insurance master criteria in order to add greater granularity to the rating of mortgage insurers. Fitch employs 12 key credit factors, five qualitative and seven quantitative, in its fundamental credit analysis of all insurers, including mortgage insurers. The exposure draft describes how the application of these credit factors to mortgage insurer ratings may be distinct from other non-life insurers. Fitch invites feedback from market participants until Feb. 28, 2017. Fitch proposes a typical rating range for mortgage insurance company Insurer Financial Strength (IFS) ratings that extends from the 'BBB' through the 'A' category. Currently, Fitch expects Australian mortgage insurers are more likely to be rated in the 'A' category, or even the low end of the 'AA' category. However, relatively less favorable current market conditions make it more likely U.S. mortgage insurers would be rated in the 'BBB' category, or possibly the low end of the 'A' category. If recent improvements in market fundamentals and operating earnings prove sustainable, Fitch expects the typical rating range for U.S. mortgage insurers would also migrate to the 'A' category over time. Fitch proposes to evaluate mortgage insurer capitalization using a combination of traditional operating leverage ratios and by evaluating performance relative to risk and non-risk-based regulatory capital requirements, as applicable. In the U.S., where a regulatory risk-based capital measure is currently not used, Fitch will look at risk-based capital measures recently developed by U.S. government sponsored enterprises (i.e. private mortgage insurer eligibility requirements, or PMIERs). Fitch does not plan to develop or use a proprietary capital model to support its mortgage insurance analysis. Fitch believes mortgage insurers' underwriting results are more volatile than those of other non-life insurers. As a result, the agency has proposed combined ratio guidelines for mortgage insurers that are more conservative than the benchmarks Fitch uses for other non-life insurers. Currently, Fitch publicly rates 4 mortgage insurers globally. The proposed criteria are not expected to result in any changes to published ratings. Fitch invites feedback from market participants. Comments should be sent to by Feb. 28, 2017. Fitch will publish on its website any written responses it receives, in full, including the names and addresses of such respondents, unless the response is clearly marked as confidential by the respondent. Following the review period and consideration of responses received, Fitch expects to finalize and publish the criteria in first- or second-quarter 2017. Contact: Donald F. Thorpe, CPA, CFA Senior Director +1 312 606-2353 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 John Birch, ACII Director +61 2 8256 0345 Keith Buckley, CFA Managing Director +1 312 368-3211 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available at Related Research Exposure Draft: Mortgage Insurance (Global) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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