The events of the last few years, particularly those in the global financial crisis that began in 2007, indicate that mortgage insurance (MI)1 is subject to significant stress in the worst tail events. This report examines the interaction of mortgage insurers with mortgage originators and underwriters and makes a set of recommendations directed at policymakers and supervisors which aim at reducing the likelihood of MI stress and failure in such tail events. Policymakers should consider requiring that mortgage originators and mortgage insurers align their interests; Supervisors should ensure that mortgage insurers and mortgage originators maintain strong underwriting standards. Supervisors should be alert to – and correct for – deterioration in underwriting standards stemming from behavioral incentives influencing mortgage originators and mortgage insurers; supervisors should require mortgage insurers to build long-term capital buffers and reserves during the troughs of the underwriting cycle to cover claims during its peaks; supervisors should be aware of and take action to prevent cross-sectoral arbitrage which could arise from differences in the accounting between insurers’ technical reserves and banks’ loan loss provisions, and from differences in the capital requirements for credit risk between banks and insurers and the supervisors should be alert to potential cross-sectoral arbitrage resulting from the use of alternatives to traditional mortgage insurance; and7. Supervisors should apply the FSB Principles for Sound Residential Mortgage Underwriting Practices2 (“FSB Principles”) to mortgage insurers noting that proper supervisory implementation necessitates both insurance and banking expertise.