QBE has been selected as the exclusive provider of Lenders Mortgage Insurance (LMI) to the home loan customers of National Australia Bank (NAB).

Earlier this year, NAB decided to move forward with only one LMI provider as part of a wider effort to simplify its core home lending business. It put a request for proposals out for tender in February, from which QBE has been selected as the bank’s exclusive mortgage insurance provider.

NAB won’t renew its LMI contract with Genworth – worth 12% of annual gross written product (or $52 million last year) – after it expires on November 20.

“We are disappointed in the outcome,” Genworth CEO Pauline Blight-Johnston said. “We believe we presented a strong offer that reflected the risk of the portfolio while maintaining adequate returns on equity for our shareholders.”

NAB says it will continue to work with Genworth to manage and support existing LMI customers.

“Genworth and QBE have been great partners with us for many years and this was a difficult decision given the strong value of their service to NAB and our customers,” a spokesman said in a statement emailed to insuranceNEWS.com.au.

The news comes as S&P revised Australia's mortgage insurance sector industry risk from low to “moderately high” and said profitability will be pressured by worsening economic conditions.

Risks are “firmly on the downside” given uncertainty surrounding the duration of the current COVID-19 related downturn and the timing and extent of the rebound, the ratings agency says, adding that Australia is not immune to the impact of coronavirus and “the shape and form of recovery remains unclear”.

The ratings agency says mortgage insurers' profitability will moderate further over the next one to two years, with the number of new policies contracting and increasing claims resulting from higher unemployment and a potential decline in property values.

Genworth, which has relationships with over 100 lenders across Australia, renewed its largest customer CBA in January for a further three years.

It says it has also recently secured other renewals, including an exclusive LMI relationship with a non-major bank, renewed for three years from April 2020, and an extension with a mutual lender on an exclusive basis for three years from April.