2012 Title Insurance Financial Survey/Overview
Attached for your reference is a schedule of suggested "Maximum Risk" amounts for the largest title insurance companies in the United States, as well as a number of their smaller affiliates and independent title insurance companies active in particular states or regions. The schedule is based on the insurers' financial reports to State regulatory agencies for the year ending December 31, 2011. The suggested "Maximum Risk" is just that, a suggestion as to the most title insurance risk a particular insurance company should be allowed to retain on a given project or financing. In most instances, the title insurance companies can legally accept more risk (and would be happy to do so) and this schedule is intended as a guideline for when it may be appropriate in larger transactions to diversify the title insurance risk (by requiring coinsurance and/or reinsurance) based on the financial size of the companies involved. The schedule indicates which insurers are affiliated companies, identifying the parent company under the heading "Corporate Group" where applicable. Particularly in larger transactions, real estate investors and lenders may prefer to treat one "Corporate Group" as a single insurer and require that risk be shared with unaffiliated companies through reinsurance and/or or co-insurance.
The suggested "Maximum Risk" herein is simply one-third of a company's reported "Surplus as Regards Policyholders" and reflects a rule of thumb used by certain financial institutions in the past. The underlying data from which the figures herein were derived is from the December 31, 2011 financial statements filed with state regulators by the title insurance companies listed or their affiliates (copies furnished by the insurers). Schiff Hardin LLP makes no representation or warranty regarding the accuracy of that data or the relative merits of the calculation of "Maximum Risk" contained herein versus other comparisons of the relative financial characteristics of title insurance companies. The financial condition of the companies listed may have changed since the date of those financial statements, and persons concerned as to the current condition of any company should contact that company, state insurance regulators, and/or independent rating agencies that may evaluate their financial condition (rating agencies which cover title insurers include Demotech, Inc., Duff and Phelps Credit Rating Company, LACE Financial Corporation, Moody's Investors Services and Standard & Poor's, Inc.). Schiff Hardin LLP does not provide financial advice and has compiled the information contained herein solely as a courtesy to its clients and other interested parties.
If you have questions regarding use of the suggested Maximum Risk schedule or other considerations in developing requirements for title coinsurance and/or reinsurance to diversify title insurance risk in transactions in which you are involved, please contact any of the undersigned.
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