--New York regulators reach agreements with four more insurers
over reforms in force-placed insurance market
--Subsidiary of Munich Re agrees to pay $1 million penalty
--Latest deal follows agreements with two dominant force-placed
insurers, Assurant and QBE
(Adds information on upcoming regulations in the final
paragraph.)
By Erik Holm
New York's financial regulator Thursday said it reached deals
with additional insurers as it overhauls the market for a type of
home insurance that is sold when borrowers drop their original
coverage.
The New York Department of Financial Services said it had
reached agreements with four insurers that sell limited amounts of
so-called force-placed insurance. They agreed to adopt reforms that
previously were accepted by the two biggest sellers of the
insurance.
In addition, a U.S. subsidiary of insurer Munich Re (MUV2.XE,
MURGY) named American Modern Insurance Group Inc. agreed to pay a
$1 million penalty to the state and offer restitution to some
homeowners.
"We look forward to maintaining a proactive relationship with
the NYDFS in the implementation of these changes and in ensuring
the viability of the lender-placed insurance market in the future,"
American Modern Chief Executive Manny Rios said in a statement.
Three other sellers of the coverage--Chubb Corp. (CB), a U.S.
subsidiary of Zurich Insurance Group AG (ZURN.VX ZURVY) and a unit
of W.R. Berkley Corp. (WRB)--"agreed to sign proactive codes of
conduct implementing New York's reforms," the Financial Services
Department said in a statement Thursday. The three were found not
to have engaged in the payment schemes that regulators had worked
to eliminate at other companies.
The latest effort follows individual settlements between DFS and
the two biggest force-placed insurers, Assurant Inc. (AIZ) and QBE
Insurance Group Ltd. (QBIEY, QBE.AU). Assurant agreed in March to
pay a $14 million penalty and cut rates, while QBE agreed in April
to pay $10 million and file for reduced rates.
The overhaul efforts by the superintendent of DFS, Benjamin
Lawsky, are aimed at lowering the cost of home insurance sold when
borrowers drop their original coverage.
In public hearings last year, Mr. Lawsky grilled Assurant and
QBE about their relationships with lenders and mortgage servicers.
The state maintained those relationships have been highly
profitable for the companies at the expense of consumers. Instead
of competing by offering lower prices, Mr. Lawsky has argued, the
insurers have largely competed by offering to share profits with
the mortgage companies.
Mr. Lawsky's reforms include prohibitions against paying
commissions to insurance agencies and brokers that are affiliates
of mortgage servicers. The effort is designed to prevent the
servicers from benefiting when the coverage is "forced" on
borrowers who drop their required, standard homeowners
coverage.
The department said it will soon issue regulations that codify
the rules agreed to by each of the existing sellers of the coverage
so that any company that decides to sell force-placed insurance in
the future will also be affected.
Mr. Lawsky has also urged his fellow insurance regulators in
other states to adopt New York's reforms.
--Leslie Scism contributed to this article.
Write to Erik Holm at erik.holm@dowjones.com.
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