The State of Canadian Mortgage Insurers (Special Report)

Canadian-Mortgage-Default-Insurers The Globe & Mail ran another controversial piece on Genworth and AIG last week.

The article suggested that Canada’s two private mortgage insurers have “unsustainable” business models and are writing virtually no new insurance.

There is more to this story than meets the eye, however.  Our report examines the issues surrounding this topic in depth.


  1. Does Genworth and AIG sponsor this website? Your points Rob do not address something important and that is–who cares! They knew what they were getting into when they entered the Canadian market, they knew they would only get 90% coverage and set up shop anyway!
    Also you contradict yourself when you say they offer the same products as CMHC anyway.

  2. Competition is vital to our business. I hate to date myself but I remember the days before GE came to town. The insurance process was not easy back then with one insurer.
    I must also say that Olive could probably ease up a bit on the rudeness. In case it is not obvious to her, she herself comes across as a stakeholder in CMHC or the Globe and Mail.

  3. Thanks to all for the feedback.
    Olive, in response to your question, a great number of people care about these issues, for reasons already stated. Moreover, the government and mortgage industry have been observing these developments closely.
    As you know, the world has changed dramatically since private insurers entered our market. The U.S. subprime fallout has altered the landscape in ways few could foresee. We know the benefits of insurer competition because we’ve seen the transformation of the industry firsthand. We also see daily how having alternative insurers benefits our clients. As a result, maintaining competition is a cause we feel is naturally important.
    The fact that insurers today offer similar products is merely one perspective. It does not address the future consequences of leaving one insurer in such a dominating position, or the present benefits of having choice.

  4. Again,
    They knew what they were getting into when they entered the Canadian market, they knew they would only get 90% coverage and set up shop anyway!
    Hard to feel sorry for these companies that make millions in the good times.
    And also news flash—the only big lender using Genworth right now is BNS, and AIG is a fringe player with the smaller lenders using them.
    As a taxpayer yes I am a stakeholder in CMHC smart-alex, and if you pay taxes you are too.

  5. As much as this pains me, I think I sort of agree with olive (as much as I might dissappove of his/her debating tactics).
    Why should tax payers guarentee a privete companys profits? As a crown corp, CMHC profits go back to canadians. If we offer the same guarentee to privates, do we get the profits too? I think not.
    While I agree that having more choice is a good thing for the consumer, I just don’t see the gov taking on more risk with the only upside being more competition. ESPECIALLY when it means more competition against themselves.
    Reminds me of all the private/public debates around ICBC insurance in BC.
    That said, Rob was spot on when he said that the globe article was incorrect as best, and misleading at worst. This is why I enjoy this site so much, it really is an excellent source of info and opinions. And this, like most issues, seems to be no clearly right/wrong answer.
    Keep up the good work Rob!

  6. Blair you raise fair points and do so politely. (Certain people on this site could take note)
    I tend to differ in my conclusions but you seem to have perfectly summarized the main resistance to private insurer guarantees.
    a) Taxpayers being on the hook for the guarantees
    b) CMHC profits flowing to the Canadian treasury
    With respect to point “a” anyone can go to OSFI’s website and see that insurers are highly regulated entities with deep asset reserves. The infinitesimal risk of failure must be weighed objectively against the repercussions of inaction.
    Regarding point “b” this too is a fair question. I would submit however that the dollar value of annual consumer benefits achieved through competition greatly exceeds CMHC’s $1 billion annual net profit.
    Blair is right that competition is the main point of private insurer backing, and competition yields many tangible sub-benefits. The problem is that some people get hung up on the word “competition” and automatically attach negative connotations. This obscures the issue needlessly.
    I don’t think anyone would deny that industry participants agree with the ultimate implication of this debate: that we cannot allow the reversion to a one-insurer system. If Genworth and AIG are allowed to wither into irrelevance then the Canadian government has done homeowners and taxpayers in general, an immense disservice.
    This debate should be decided like all other governmental policy decisions–using simple cost/benefit analysis with little attention paid to rhetoric, exploitative journalism, or self-interests.

  7. When the going gets tough, the tough get going. The “private” insurers, Should be forging ahead wiht innovation and finetuning of their delivery instead of whining that things aren’t fair.

  8. A very well written and thoughtful article. I’m in CMT’s camp on this one, their needs to be fair competition to CMHC to keep them honest, keep default insurance costs down, and to continue innovation. And a good point is CMHC basically offers the same products as the others NOW, but only because someone else did it and was successful (ie. Genworth Alt A).

  9. No one has mentioned Olive’s correct point:
    They knew what they were getting into when they entered the Canadian market, they knew they would only get 90% coverage and set up shop anyway

  10. When they set-up shop and only had the 90% coverage …it didn’t really matter. Investors didn’t care, and still bought their ‘paper’. But when the global credit crunch happened, investors got skitish and, as stated previously, are now only attracted to 100% guarantees. As stated by several people, the chance of them going belly-up is so incredibly small, that it is silly that the government doesn’t 100% guarantee them in order to promote fair competition. The low risk that anyone is “on the hook” is far out weighed by the benefits of competition.

  11. The competition angle being used to promote profits for Genworth and AIG, crazy. FYI–AIG is owned by the U.S. government at this point let the U.S. government guarantee the 100% for them.
    As for Genworth, let them run back to their former owner GE and ask them to take them back and protect them, ooops guess not 14 year low on the GE stock price.
    Get the point here folks, why as a tax payer would I want to give AIG and GE the benefits the government has, this is survival of the fittest, it is bad enought that the Canadian Bond Fund was set up to save several institutions but to knowing help AIG and Genworth so they continue to come up with great products like BFS-high ltv, no doc programs–LOL, wake up people that is the reason the whole credit crisis hit–HELLLOOOO!

  12. I have to agree with Olive. As one of the dragons from “Dragon’s Den” said about auto sector companies … “These are LOSER companies and the Canadian taxpayer should not be supporting LOSERS!!!” The same is true about the private insurers. Competition is good (nobody denies) but there is a difference between “encouraging competition” and “ensuring all companies are equal at all costs”. Let the loser companies die.

  13. I saw all this before with the MICC debaucle of the early 90’s. How soon certain individuals posting here forget it was GE Capital (GENWORTH’s precursor), not CMHC, who bailed them out and the millions of Canadian mortgages who they insured. Since then, GENWORTH has assisted millions of credit worthy Canadians in realizing their homeownership dreams.
    I take exception to those who dump all over programmes such as ‘Alt-A’, as it is very clear they have no idea of credit granting basics. GENWORTH was the first to acknowledge that an individual’s credit behavior is just as important as the income confirmed on Line 150 of their Notice of Assessment. ‘Alt-A’ was never a receptacle for your typical bad credit, no income Canadian (Wells Fargo and Xceed catered to that market segment); rather, it was reserved for those individuals whose FICO scores were typically higher than “traditional” fully-qualified borrowers. It should also be noted that “Alt-A” borrowers were made to pay a significantly higher insurance premium than traditional borrowers.
    The most recent national mortgage default numbers are still under .35%, and both Banks and the federal government acknowledge that potential upward spikes in defaults will be attributed to job losses, not bad credit granting practices. So what gives? The $75B government mortgage bailout applies to all mortgages, regardless of which company insures them. Acknowledging this, the federal government should be coming full-circle on this issue and openly guaranteeing the additional 10%, for no other reason than it is already doing it.
    If GENWORTH and AIG are allowed to fail, both Banks and borrowers, buyers and sellers, will be held ransom to the monopoly CMHC will hold. We brokers and the borrowers we represent, are already experiencing this, where lenders are absolutely unwilling to reroute an application to GENWORTH or AIG, if CMHC has already declined it. This applies to all borrowers (Alt-A and traditional). In the end the implications affect all Canadians.

  14. Mike, you only need 20% down for regular residential properties.
    AIG is owned by the U.S. government, let them come cover any losses (think about that for a second folks, you want us to even the field for AIG which is owned now by the U.S. government, okay that should be that end of that debate, let them save it.
    And again, Genworth and AIG entered the marketplace knowing the rules of engagement and still decided to start up in Canada.
    You know I am right!

  15. Olive I apologize for saying this but your post reeks of ignorance.
    AIG United Guaranty is a member of the Commercial Insurance Group of companies. CIG is a completely separate and insulated subsidiary.
    The U.S. government’s intervention will have no impact on CIG or AIG U.G….other than bad PR from those who are uninformed.

  16. Hey Truth, so have AIG go to the Commercial Insurance Group of Companies, and come up with the 10% that’s missing–boo hoo, LOL!

  17. Olive, you say “the only big lender using Genworth right now is BNS, and AIG is a fringe player with the smaller lenders using them.”
    Just wondering, how do you know that? I don’t remember reading this anywhere.
    Do you have a friend on the inside? Or are you on the inside?

  18. To correct some inaccuracies being promoted by certain individuals contributing to this board, there are no lenders (big or small), except for those still self-insuring, who do not still maintain the option of using GENWORTH. No one lender has officially (publicly) stated they will no longer use AIG/GENWORTH; however, we do know firsthand, of internal directives being given to underwriters, to give CMHC priority. We also know, firsthand, that GENWORTH is still underwriting/insuring mortgages for TDCT, BNS, Laurentian, ING, BMO, RBC, CIBC/Firstline (to name only a few)but these mortgages are usually being treated as “one-offs” with special consideration being given to either the Broker or the client’s situaton.
    On a personal note, to those spewing these inaccuracies, you do not serve your constituants well by promoting these myths. Bankers and mortgage brokers alike, are fiduciaries entrusted to work on behalf of the clients they serve. We all need to become advocates for better and wider access to mortgage funds.

  19. T.Davino, you are incorrect, the ONLY big bank using Genworth is BNS, the other’s are not using for the simple basis of this article, why send to Genworth and only receive a 90% default premium vs. 100% with CMHC, secondly the insolvency issue with Genworth and AIG, have you checked the stock prices of these companies of late? There is no agenda here, despite what you seem to think.
    Like I have said before-“They knew what they were getting into when they set up shop in Canada–you don’t agree to rules of engagement and then cry when things are bad for you!

  20. Why not drop CMHC to 90% guarantee to even the playing field? Could it be that the competition would be too stiff? If it was a Canadian company asking for the same in the U.S. we would be up in arms. Level the playing field and let the game begin. Posted rate USED to be the rate you received until COMPETITION happened…..Duh!

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