Just over a year ago, Canada was caught up in a global credit panic. The perceived riskiness of private mortgage default insurers caused their combined market share to plunge an estimated 50% from the summer of 2007 to mid-2009.

Some in the media were going as far as calling private insurers “unsustainable.”

That sort of short-sightedness has since blown over.

Canada’s two private insurers, Genworth Canada and Canada Guaranty, are doing quite well by most accounts. Genworth just reported $85 million in profit and a 71% increase (year-to-date) in new insurance written.

Of the two privates, however, Canada Guaranty (formerly AIG United Guaranty), has had to make the biggest relative comeback. That’s thanks to the colossal liquidity crisis at its old U.S. parent, AIG.

Canada Guaranty has since been acquired by the Ontario Teachers’ Pension Plan (OTPP). That’s helped it make steady progress in adding new lender partners and re-asserting itself as Canada’s #3 insurer. The OTPP acquisition was brilliant in that it added considerable counter-party strength as well as Canadian ownership, both of which lenders find appealing.

As of today, Canada Guaranty’s approved lenders include Street Capital (just added this past Tuesday), First National (the biggest non-bank lender), Home Trust, AGF, and Bridgewater Bank. We also hear whisperings that some major banks will be on board in the not-too-distant future.

From a lender’s standpoint, there’s an incentive to allocate a portion of their insurance business to private insurers. For one, it keeps CMHC further from monopoly status. In addition, having multiple insurers gives lenders options when a file doesn’t meet one insurer’s guidelines.

Canada Guaranty is not an mortal threat to CMHC at the moment. As time progresses, however, it should certainly acquire a fatter slice of the market.