Mortgage Insurance Loss Forecasting
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The document summarizes various methods for mortgage reinsurance loss forecasting including aggregate versus loan-level models, deterministic versus stochastic approaches, and loss development and Bornhuetter-Ferguson methods. It also discusses using loan-level transition processes, underwriting characteristics, economic factors, and hedging tools like interest rate swaps and real estate futures to estimate losses and hedge risk.
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Determine which attributes are most predictive of credit event frequency in residential U.S. mortgages
An Actuarial Approach to Valuing Mortgage Backed Securities EAAC 2009 Kyle Mr...
background on mortgage securitization, describes fundamental process of valuing mbs, highlights pitfalls and challenges of valuing mbs
the big one
The looming risk of an earthquake-triggered mortgage crisis in California
A major California earthquake could cause tens of billions of dollars in mortgage defaults in San Francisco alone, where subprime exposure is even less than in other parts of the financially troubled state.
One of the scariest aspects of any crisis is not knowing how much worse it can get. The current crisis is no different. The sudden realization of vulnerability can lead to a predilection for imagining worst-case scenarios or a willful ignorance of urgent realities. What\'s needed instead is a frank accounting of the ongoing risks and well-founded plans to deal with them.
It is in this spirit that we highlight the risk of yet another financial crisis lurking in California that has received precious little attention: A major earthquake would leave many California population centers susceptible to a wave of mortgage defaults rivaling those we\'ve seen to date. Because only 12% of California homeowners carry earthquake insurance and private mortgage insurance does not cover damaged properties, mortgage investors would be left in the rubble holding abandoned, damaged properties and defaulted loans.
An Analysis of the Limitations of Utilizing the Development Method for Projec...
Abstract: The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
Mrotek Cullinane Feature Article Iasa Interpreter Summer 2010
The implementation of the MAR in 2010 will
provide a valuable opportunity for insurers
to assess the effectiveness of their internal
controls and the accuracy of their financial
reporting. Insurers must promptly develop a
strategy for compliance with the MAR if they
have not done so already. A set of corporate
norms for complying with the new MAR
has yet to develop, but actuaries have the
knowledge and skills to assist in many aspects
of the process and can help determine the set
of best practices moving forward.
Mrotek Schmitz 2010 Cas Annual Meeting Final
The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
Loss Reserving For Financial Guaranty Insurance
Loss reserving for financial guaranty insurance, presented at the Casualty Actuarial Society’s 2010 Casualty Loss Reserving Seminar, Orlando
Be An Actuary In London
Presentation on working as an actuary abroad in London, as presented to University of Wisconsin\'s actuarial club in 2005
Individual Capital Assessment – Setting Solvency Capital Levels
ICA Individual Capital Assessment analysis as presented at Milliman\'s 2005 Casualty Consultants Forum
Mortgage Insurance Outlook
A presentation on the outlook of mortgage insurance, as presented at the Casualty Actuarial Society\'s 2008 Annual Meeting in Seattle
History of Mortgage Insurance
A presentation on the history of mortgage insurance, as presented at the Casualty Actuarial Society\'s 2008 Annual Meeting in Seattle
Private Mortgage Insurance
A presentation on the overview of loss reserving for lender captive mortgage reinsurance as presented at the Casualty Actuarial Society\'s 2008 Casualty Loss Reserving Seminar in Washington DC
State Of Mortgage Insurance Industry
Mortgage insurers are making their underwriting and pricing more stringent in response to declining housing values. They are increasing minimum credit scores and loan-to-value ratios, restricting certain geographic markets, and imposing additional eligibility requirements like down payment sources, appraisal and reserve verification, and home buyer education.
Actuarial Approach to MBS Valuation
An Actuarial Approach to MBS Valuation, as presented at the CAS\'s 2009 Spring Meeting in New Orleans, Kyle Mrotek and Neal Dihora
The Actuary and FAS 163
FAS 163 provides guidance for accounting for financial guarantee insurance contracts. It requires (1) recognition of claim liabilities when credit deterioration occurs prior to default, (2) measurement of claim liabilities using discounted expected future cash flows, and (3) expanded disclosures about FGI contracts, assumptions, and risk management activities. The standard creates consistency in FGI accounting and financial reporting. Its implementation resulted in significant adjustments to unearned premium reserves, loss reserves, and reinsurance balances for major FGI companies. Statutory accounting is also considering revisions to require more FAS 163-like disclosures.
More from kylemrotek (15)
Statistical review of mortgage credit risk variables ica 2010
Statistical review of mortgage credit risk variables ica 2010
An Actuarial Approach to Valuing Mortgage Backed Securities EAAC 2009 Kyle Mr...
An Actuarial Approach to Valuing Mortgage Backed Securities EAAC 2009 Kyle Mr...
An Analysis of the Limitations of Utilizing the Development Method for Projec...
An Analysis of the Limitations of Utilizing the Development Method for Projec...
Mrotek Cullinane Feature Article Iasa Interpreter Summer 2010
Mrotek Cullinane Feature Article Iasa Interpreter Summer 2010
Individual Capital Assessment – Setting Solvency Capital Levels
Individual Capital Assessment – Setting Solvency Capital Levels
Mortgage Insurance Loss Forecasting
- 1. Mortgage Reinsurance Loss Forecasting Presented by: Kyle Mrotek, FCAS, MAAA Four Seasons Hotel, Las Vegas September 26, 2008
- 12. Methodology
- 13. Methodology Source: Milliman, Fitch
- 14. Methodology
- 15. Methodology
- 16. Methodology Source: PMI Group 0% - 10% 10% - 20% 20% - 40% 40% - 60% 60% - 100% Geographic Distribution of Market Risk Index SM @ Summer 2008 Probability That House Prices will be Lower in Two Years
Editor's Notes
- TITLE SLIDE, OPTION #3