New York Reaches Settlement With QBE, Assurant

New York officials announced on April 18 that a New York State Department of Financial Services (DFS) investigation produced a settlement with a major “force-placed” insurer QBE.

The settlement with QBE, the nation’s second-largest force-placed insurer, follows a similar deal the state reached with the country’s biggest force-placed insurer Assurant on March 21. The Assurant settlement included a set of wide-ranging reforms, restitution for impacted homeowners and a $14 million penalty paid to New York.

The QBE settlement also includes restitution for affected homeowners, a $10 million penalty paid to the state, and a set of reforms first agreed to by Assurant.

Regulators alleged that the premiums charged to homeowners for force-placed insurance had been “two to 10 times higher” than premiums for voluntary insurance.

Regulators also alleged the loss ratios for force-placed insurance seldom exceeded 25 percent. Nevertheless, rate filings made by insurers reflected loss ratio estimates of 55 to 58 percent. Regulators also said insurers and banks have built a network of relationships that have driven premium rates to “inappropriately high levels” ultimately paid for by consumers and investors.

Key terms of the settlement include:

• If QBE’s actual rates in any year result in an actual loss ratio of less than 40 percent for the immediately preceding calendar year, QBE will be required to re-file its rates for the next year for DFS review in order to bring the loss ratio back up.
• To put a stop to the practices found in DFS’s investigation, QBE shall not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with QBE. QBE also shall not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
• The company also shall not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
• QBE shall not pay contingent commissions based on underwriting profitability or loss ratios.