A slump in demand for mortgage insurance and the well-known "high and rising level of tail risks embedded in the Australian housing market" lie behind a cut in the credit rating of Genworth Australia by Moody's.Moody's has cut Genworth's rating to Baa1 from A3.The ratings agency explained that the "regulatory macro-prudential measures undertaken since 2015 ... have led to a decline in the origination of higher loan-to-value ratio loans," the kind that need mortgage insurance."This development has in turn led to a sharp fall in gross written premiums for Australian LMI providers, with Genworth Australia reporting a 25 per cent fall in gross written premium for 2016 and a 20 per cent decline for 2015."The shift to lower LVR origination is also putting pressure on the average premium that Genworth Australia is able to charge its customer base," Moody's said.The average premium of Genworth Australia's flow business declined to 1.65 per cent in early 2017 from 1.82 per cent in early 2014.Genworth's long term customers have also turned up other suppliers."Australia's domestic LMI providers have been facing a longer-run reduction in demand for their products," Moody's said."Firstly, under current regulatory capital rules, Australia's largest banks ... do not derive any regulatory capital benefits from using LMI."This has contributed to an increased willingness of the major banks, which comprise approximately 80 per cent of the system, to originate loans with LTVs over 80 per cent to high quality borrowers without third-party LMI.Secondly, foreign LMI providers have entered the market."