Westpac has announced that it will sell its Lenders Mortgage Insurance (LMI) business to Arch Capital Group. The sale is expected to be completed by the end of the year, subject to regulatory approval.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance is a type of insurance that protects lenders from financial loss if a borrower defaults on their home loan. It is typically required by lenders if the borrower has a deposit of less than 20% of the property’s value.
Westpac’s LMI business provides this insurance to its customers and has been in operation for over 50 years.
Why is Westpac Selling its LMI Business?
Westpac has stated that the sale of its LMI business is part of its strategy to simplify its operations and focus on its core banking business.
The sale will also help Westpac to raise capital and strengthen its balance sheet, which has been impacted by the COVID-19 pandemic and the recent regulatory action against the bank.
Who is Arch Capital Group?
Arch Capital Group is a global insurer and reinsurer, with operations in North America, Europe, and Asia Pacific. The company has a strong track record in mortgage insurance, and the acquisition of Westpac’s LMI business will expand its presence in the Australian market.
What Does the Sale Mean for Westpac Customers?
The sale of Westpac’s LMI business is not expected to have any impact on existing customers. Arch Capital Group has stated that it will honour all existing policies and continue to provide the same level of service to customers.
However, the sale may have an impact on future customers, as Arch may change its pricing and underwriting criteria for new policies.
What Does the Sale Mean for the Australian Mortgage Insurance Market?
The sale of Westpac’s LMI business to Arch Capital Group will increase competition in the Australian mortgage insurance market. Arch will now compete with existing providers such as Genworth and QBE.
This increased competition may lead to lower premiums for borrowers, as insurers compete for market share.
Conclusion
The sale of Westpac’s LMI business to Arch Capital Group is a significant development in the Australian mortgage insurance market. It will increase competition and may lead to lower premiums for borrowers.
Existing customers of Westpac’s LMI business should not be affected by the sale, but future customers may need to consider the pricing and underwriting criteria of Arch Capital Group.