Mortgage — Credit risk sharing analysis

As a leading provider of mortgage credit risk analytics, Milliman assists parties participating in the credit risk sharing markets in the management of their existing portfolios and the analysis of emerging opportunities. Fannie Mae’s Credit Insurance Risk Transfer (CIRT) and Freddie Mac’s Agency Credit Insurance Structure (ACIS) are providing increasing opportunities for insurance and reinsurance companies to assume mortgage credit risk through credit insurance transactions.

Leveraging its industry leading actuarial and mortgage credit risk modeling expertise, Milliman provides insurance and reinsurance companies with meaningful, independent evaluation of these structures. In addition, Milliman’s focus on transparency gives companies a deeper understanding of the performance drivers underlying credit risk. Milliman provides its credit risk sharing clients with a diverse array of consulting support, including:

  • Evaluation of CIRT and ACIS transactions

    The government-sponsored enterprise (GSE) credit risk sharing space is continuously evolving with new opportunities for insurance and reinsurance companies to assume mortgage credit risk. As these opportunities evolve, Milliman provides its clients with analysis tailored to the unique characteristics of the emerging risks.

    Using a framework developed through extensive analysis of mortgage collateral performance and insurance contract evaluation, Milliman evaluates existing and upcoming CIRT and ACIS transactions through loan-level collateral analysis, deterministic econometric modeling techniques, and Monte Carlo stochastic simulations. Through this framework, insurance and reinsurance companies can evaluate expected and probabilistic loss and premium emergence, assumed risk evolution, and pro-forma returns associated with these structures.

  • Portfolio analytics

    Milliman provides insurers and reinsurers with existing credit insurance portfolios with the tools to analyze their existing portfolios. Credit insurance risk sharing performance is driven by large pools of mortgage loans subject to temporal and geographic correlation. Quantifying exposure and expected performance related to these portfolios can require monthly evaluation of the underlying collateral. Leveraging available performance data and Milliman’s credit risk performance models, insurance and reinsurance companies can monitor credit risk portfolios to support risk management and financial reporting.

  • Integration with existing risk management frameworks

    Many insurance and reinsurance companies participating in the credit risk sharing market have sophisticated risk management frameworks tailored to a diverse variety of risks; however, mortgage collateral performance is driven by unique underwriting and economic phenomena.

    Milliman’s credit risk sharing analytics can be tailored to integrate with existing risk management frameworks through custom deterministic analyses or value-at-risk (VaR) and tail value-at-risk (TVaR) reporting.

  • Actuarial support and training

    Milliman has provided consulting services, including actuarial reserve opinions, to the mortgage insurance space for over 20 years and understands the unique risk profile, premium emergence patterns, and loss emergence patterns of mortgage credit risk. The emergence of GSE credit risk sharing transactions has broadened actuarial interest in this field.

    Milliman offers its clients on-site training sessions discussing the evolution of the credit risk sharing market, risk profiles of mortgage credit risk, and actuarial support for analyzing transactions.


Related services

Mortgage consulting

Mortgage compliance

Mortgage valuations and reserving

Mortgage feasibility studies

Mortgage government services

Mortgage performance models

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Connect with Milliman experts

Glowacki Jonathan

Jonathan Glowacki

Principal and Consulting Actuary

Jonathan is a principal and an experienced consulting actuary with the Milwaukee office of Milliman. He is a fellow and chartered enterprise risk analyst through the Society of Actuaries. He is proficient in working with and analyzing ...

Bjurstrom Kenneth

Kenneth Bjurstrom

Principal, Financial Consultant

Ken is a principal with the Milwaukee office of Milliman and joined the firm in 1998. He manages a practice dedicated to analyzing the financial risks associated with issuing and servicing mortgages, mortgage guaranty insurance, and mo...

Schmitz Michael

Michael Schmitz

Principal, Consulting Actuary

Michael Schmitz is a principal and consulting actuary in the Milwaukee office of Milliman and has been with the firm since 1993. Mike manages a practice dedicated to financial risks such as mortgage guaranty, financial guaranty, and cr...

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