Nick Wild, of JLT Insurance Management in Guernsey,
discusses how the company created innovative solutions for the
housing and mortgage markets in the wake of the financial
crisis.
I believe innovation is often driven by necessity, as it is hard
to innovate and easy to replicate. However, replication does not
work when there has been a shift in the underlying economic
environment.
The current financial crisis has its roots in substantial
failures in the US housing and mortgage markets. It is not my
intention to discuss the causes but it is important to understand
the consequences and how this led to the need to innovate. The
global financial crisis left the UK mortgage market without the
support of a viable Mortgage Insurance (MI) product and that left
the borrower with few mortgage lenders that could afford to lend at
95% Loan to Value (LTV). Under Basel rules, the capital charges on
loans of 95% LTV are very high.
