S&P Global Ratings (S&P) has changed the Australian mortgage insurance sector's insurance industry and country risk assessment (IICRA) from intermediate to low, as well as from negative to stable.
The latest IICRA showed that the risks associated with the COVID-19 pandemic-induced slowdown have eased for Australian mortgage insurers, with ultra-low interest rates and government initiatives spurring a high level of activity in the mortgage market over 2020 and 2021. It also found that a significant increase in the volume of new home loans, along with low levels of claims and some reserve releases, resulted in strong underwriting performance across the sector.
“Australia proved to be very resilient to COVID-19 effects, and the economy bounced back strongly after a brief downturn,” S&P said.
S&P expects the mortgage insurance sector's profitability to be out of danger over the medium term, thanks to low unemployment and solid house price appreciation over the past two years.
The report added: “While macroeconomic and geopolitical risks continue to weigh on the global economy, we expect Australia's economy to support mortgage insurers' near-term profitability. Our view of Australia's country risk remains unchanged at very low, and we now assess the sector's industry risk as moderately low, from moderately high.”
The Australian mortgage insurers' assessment follows S&P's assessment of the Australian property and casualty (P&C) insurance sector.
