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Radian enhances reinsurance at renewal after proposed changes to PMIERs

18th January 2018 - Author: Luke Gallin

Radian Group subsidiary, Radian Guaranty, has announced enhancements to its Single-Premium Mortgage Insurance (MI) Reinsurance Program, in response to proposed changes to Private Mortgage Insurer Eligibility Requirements (PMIERs).

Radian Group logoThe enhancements include an increased cession of business for its single-premium MI quota share reinsurance arrangement, which it entered into in 2016, from 35% to 65% for single-premium policies with effective dates in 2015 through 2017.

The enhancements are effective December 31st, 2017 and Radian Guaranty has agreed the new and increased cession with its panel of reinsurers, and it has also been approved by GSEs Fannie Mae and Freddie Mac.

Proposed changes to the PMIERs, which are being recommended to the Federal Housing Finance Agency (FHFA) by the GSEs, appears to have driven the increased cession for the firm’s reinsurance program, ensuring Radian can comply with the proposed changes by the effective date.

In order to meet the new requirements, Radian Group has also announced that on December 28th, 2017 it transferred $100 million of cash to Radian Guaranty in exchange for a surplus note.

RMS

As a result of the enhanced reinsurance arrangement and the issuance of an intercompany surplus note, the firm’s “Available Assets” under the PMIERs were roughly $3.7 billion, and its “Minimum Required Assets” under the PMIERs were around $3.2 billion, resulting in an excess of approximately 14%, or $450 million.

The firm states that this is compared to an excess of approximately $237 million, or 7%, at September 30th, 2017.

Furthermore, Radian Group maintained roughly $200 million of available liquidity as of December 31st, 2017, taking total available liquidity to roughly $425 million, as at December 31st, 2017.

Rick Thornberry, Radian’s Chief Executive Officer (CEO), said; “Our ongoing compliance with PMIERs allows us to continue to support our customers with the products and services they need, and helps create sustainable homeownership opportunities for more families.

“I am pleased with our financial strength and flexibility, which allow us to effectively manage our capital position today and are expected to enable us to comply with the proposed changes to PMIERs.”

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