|Mortgage Guaranty Insurance Corp. has obtained approval to reactivate a dormant subsidiary so that it can keep writing new business.
The Office of the Commissioner of Insurance for the State of Wisconsin approved a reactivation plan for MGIC Indemnity Corp., a statement today said.
The subsidiary must still obtain an authorization from Wisconsin and licenses in other states. It also needs approval from Fannie Mae and Freddie Mac. In some states, business will be run through another wholly owned subsidiary that will be capitalized with around $8 million.
Under the plan, MGIC Guaranty will contribute up to $1 billion to MGIC Indemnity. The first investment of $500 million will occur by July 31, while the second $500 million installment will need to be made within five business days after January 1, 2011.
The move will allow the Milwaukee-based firm to continue writing new business in its current markets. If all goes well, MGIC Indemnity hopes to begin writing new mortgage insurance business on Jan. 1, 2010.
Human resources as well as risk management, information systems and other business infrastructure will be provided by MGIC Guaranty.
MGIC is maneuvering to avoid a potential rift with policyholders who might fear the re-activated operations could siphon capital that might otherwise be used to pay their claims.
“Since MGIC Indemnity Corp. is a wholly owned subsidiary of MGIC Guaranty Insurance Corp., MGIC will benefit from the mortgage insurance business conducted by MGIC Indemnity Corp.,” the statement said. “MGIC’s policyholders should also take comfort from the fact that the allowance of the reactivation plan by the Office of the Commissioner of Insurance follows months of discussion and third party analysis of MGIC’s claims paying resources remaining after the capitalization of MGIC Indemnity Corp.”
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