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Genworth CEO Optimistic About Rate Risk

GenworthGenworth-Brian-Hurley Financial Canada CEO, Brian Hurley, doesn’t expect rising rates to seriously impact Genworth’s business.

When asked on BNN last week about how higher rates might affect insurance losses, Hurley said Genworth’s risk is helped by the fact that 80% of its policies have fixed rates.

For interest rate increases to cause real damage, “It has to be a fairly significant increase in rates,” he said.

“We underwrite to a stressed interest rate scenario of 250-300 bps beyond their qualifying rates, so we can withstand that. I don’t think we’ll see a ramp like that for a few years anyway.”

He said the biggest driver of insurance losses is unemployment. “As unemployment improves, so shall our losses to a certain extent.”

“The size of our losses is determined by house prices,” he adds, and Genworth expects a 4-5% price gain this year (nationally).

“It’s a double whammy for us. Unemployment will come down throughout the year, home prices will continue to tick up, and that will help our losses.”

Here’s his full interview on BNN.

Genworth Financial Canada is the largest private default insurer in Canada.

Sidebar: Despite a positive national outlook, Hurley specifically singled out Calgary and Vancouver as real estate markets Genworth is “watching” for risk—especially Vancouver’s white hot “high end” market.

Rob McLister, CMT