Title Insurance Business Grows for 6th Straight Year
|November 6, 2002|
OLDWICK, N.J.--(BUSINESS WIRE)-- -The title industry experienced its sixth consecutive year of profitability in 2001, with gains from title insurance underwriting totalling $214.8 million, according to the special report, "Title Insurance and Industry Statistics--2001," recently released by A.M. Best Co.
Performance in this business line was strengthened by an upturn in revenue because of lower interest rates, which resulted in increased refinancing and home sales activity.
While the broad economy weakened in 2001, the housing sector remained strong because of Federal Reserve activity to maintain low interest rates. One indicator of the strength in the real estate sector is the housing affordability index. The index decreased to 123.1 in 2001. However, conditions improved in the latter part of 2001, following greater accommodation by the Federal Reserve.
The title insurance industry has unique characteristics compared with other property/casualty insurers. Title insurance revenue is more volatile and reflects regional and national economic conditions. In addition, it is the only line of insurance that has state-mandated reserves to protect policyholders in the event of insolvency. These reserves, called statutory premium reserves, must be funded by each title insurer with segregated funds based on state statutes. The manner in which the statutory premium reserve funds may be invested also may be mandated by state statutes. At the end of 2001, total policyholder protection for the industry (the sum of statutory premium reserves, reserves for reported claims and surplus) totaled $6.2 billion.
The industry is evolving rapidly because of consolidation activity; introduction of new and expanded products; acquisition or start-up of real estate-related services, and entry into new lines of business, as well as national and international geographic expansion. As the industry evolves, national economic cycles will, in general, be mitigated by the effects of these changes.
Other findings in the report include:
Source: A.M. Best Co.