Bulk Insurance

Bulk insurance (a.k.a. portfolio insurance) is a specialized form of mortgage default insurance that lenders purchase for a portfolio of loans.

Bulk insurance protects the lender from borrower defaults on a broader scale.

It serves three primary purposes:

  1. Risk reduction
  2. Securitization (Liquid markets like the Canada Mortgage Bond and NHA MBS program require all mortgages to be insured)
  3. Capital preservation (insured mortgages require lenders to put up less capital to back their loans)

Bulk insurance applies to mortgages with 20% equity or more. This differs from "high-ratio" (transactional) mortgage insurance, typically purchased by borrowers when they have a down payment of less than 20%.

CMHC, Sagen and Canada Guaranty all sell bulk insurance to lenders.

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