The Arch Capital disruption of Australia’s lenders mortgage insurance sector continues, with Westpac deciding to sell its captive LMI to Arch.

Westpac will use Arch to supply LMI for 10 years. Arch was already the re-insurer of Westpac LMI.

Westpac will sell the business to Arch at “book value”, but the bank will incur a loss on sale – there was a write-down of A$84 million last month and the bank will bear transaction costs.

Arch LMI now two years into its journey of disruption in a sector where the overwhelming share of premiums and profits has long been held by Genworth and QBE.

The combined underwriting result for the six specialist LMI providers in Australia, more or less a loss of $100 million over CY2020, is the first full-year loss on LMI underwriting in APRA’s rather sparse data set, one that spans less than 10 years.

Investment returns were lean last year; at $60 million these returns were less than half those in 2019.

APRA put the aggregate net loss for the LMI sector at $26 million.