The time is fast approaching when the board of the (former) lenders mortgage insurance powerhouse Helia Group must determine its fate.
Banking Day has confirmed Arch Lenders Mortgage Indemnity has won the LMI business of ING Bank Australia.
Helia said earlier this month its contract with ING expires on 30 June 2026 but includes a right for ING to terminate the contract by providing three months’ notice.
Having also won the LMI business of Commonwealth Bank and Bankwest from 2026, Arch LMI is now the undisputed leader in lenders mortgage insurance. This is only five years after opening for business in Australia in 2020, with Arch buying Westpac’s captive LMI operation in 2021.
Losing both the CBA and ING Bank LMI contracts means that Helia has lost in the order of 60 per cent of its business in the space of a few months.
The board of Helia has already said it is conducting a “review”.
Aside from losing major clients Helia (and Arch, and QBE LMI) must confront the implications of the Australian government’s policy to widen the Home Guarantee Scheme.
Under the Home Guarantee Scheme the Australian government effectively provides first home buyers with zero cost LMI for borrowers with deposits of as little as 2 per cent of the purchase price.
The guarantee, as with conventional lenders mortgage insurance, protects the interests of the lender.
The upcoming widening of the Home Guarantee Scheme means that the target market of LMI providers narrows to refinancings and second (and subsequent) home buyers.
While this is substantial the reality is that first home buyers are (and always have been) the bedrock of any LMI business model.
So, can Helia and also QBE LMI plod along?
No, or not really, is the answer.
Both – and Helia in particular, as a pure play LMI monoline – seem bound to be drawn to a runoff as the most pragmatic course.
The way LMI accounting works this will lead to a progressive release of capital, so Helia may have life as an ASX-listed entity yet.
As for Arch; Arch is understood to have pretty much curtailed its marketing efforts, with banks and credit unions approaching them.
Perhaps Arch (now rated AA-) will eventually end up buying out the remnants of Helia and command 100 per cent of whatever is left over of the lenders mortgage insurance sector in Australia.