Mortgage indemnity guarantee. Report of the Pecuniary Loss Working Party

Document description

This paper describes the recent work of the Pecuniary Loss Working Party (PLWP). Section 2 provides the context for the recent work and describes the decision to concentrate on Mortgage Indemnity Guarantee (MIG). Section 3 contains descriptions of recent developments in the MIG marketplace, covering the UK housing market, reserving practice and product development. A particular methodology has been used to describe the complex relationships between factors affecting MIG. This methodology is described in general in Section 4. Two relationship models have been developed and are also described in detail in Section 4. The Macro Relationship Model describes the economy wide relationships, whilst the Micro Relationship Model describes the relationships relevant to an individual risk. Section 5 describes the development from the Macro Relationship Model of a Catastrophe Warning Indicator. Section 6 describes the continued development of a Premium Rating and Reserving Model, which has been assisted by the development of the Micro Relationship Model. Next steps are covered in Section 7. In particular, the PLWP requests feedback on the work to date and direction for the future, both for MIG and other product lines.