Fitch has affirmed its rating and stable outlook for QBE’s lenders’ mortgage insurance (LMI) business, despite expecting absolute profit to fall.

“QBE LMI holds a major position in a niche market that is supported by high barriers to entry,” the ratings agency says in a report.

Fitch says absolute profit is likely to decline due to continued regulatory action in the residential mortgage market and the transfer of inforce risk via internal reinsurance.

“However, high regulatory requirements, resilient customer relationships and ongoing use of LMI as a low-cost risk transfer provide support for the sector.”

QBE LMI’s historically solid operating performances and lack of debt enhance financial flexibility, and internally generated capital can support growth if required, Fitch says.

Fitch has an AA- insurer financial strength rating on the business.