Moody's justified its cut in the ratings of mortgage insurers in Australia after a "review focused on the sufficiency of the LMIs' capital levels in the event of an unexpectedly severe downturn in the Australian housing market."The ratings agency said its "actions reflect Moody's view that the LMIs' standalone capital adequacy scores are appropriately placed in the low single-A range. "They also reflect Moody's view that from a business model perspective, the positive attributes of Australian LMIs' strong franchises are partly offset by their increased dependence on key customers and high levels of geographical concentration (relative to global averages)."Moody's said its stress tests "suggest that although the LMIs' capital levels would be sufficient to meet losses arising from a cyclical recession, losses arising out of an unexpectedly severe downturn (such as in the US in 2007-11) would be challenging… While risk scenarios involving a sharp correction in the housing market remain a low-probability outcome, they are plainly identifiable, and would present a considerable challenge to the Australian mortgage insurance sector, should they occur."Westpac LMI avoided a cut to its rating, and QBE LMI limited the scope of its downgrading on the basis of the reputational risks to Westpac and QBE Group if they did not support their subsidiaries.Commenting on Genworth, Moody's wrote that it "views the potential for parental support from Genworth Financial Inc to provide only modest support for Genworth Australia's rating."Genworth reports its 2012 full-year profit on Wednesday night.Australian management will hold a market briefing on Thursday.