North Carolina Lawyers Weekly
By PAUL THARP, Staff Writer
After a decade of rising revenue, title insurance companies operating in North Carolina saw their numbers fall for the second straight year in 2009.
Direct title insurance premiums earned fell to below $115 million for the first time since 2003 after a record high in 2007 of $168 million. Direct premiums earned in 2008 totaled $145 million.
Chapel Hill-based Investors Title Insurance Company had the largest market share of N.C. title insurers, with 24.1 percent. It earned $26.8 million in premiums.
California-based First American Title and Nebraska-based Chicago Title had 19.4 and 18.1 percent market share, respectively. First American earned $22.2 million in direct premiums, while Chicago earned $21.1 million.
Stewart Title, with a 12.8 percent market share and $14.1 million in direct premiums earned, and Fidelity National Title, with 7.7 percent market share and $8.8 million in direct premiums earned, rounded out the top five title insurers operating in North Carolina, by market share.
Peggy Powell, Southeast Agency Services Manager for Stewart Title, told Lawyers Weekly that the title insurance industry was affected by the economic downturn and the general downturn in the real estate industry.
“The premiums reflect a general reduction in title policies written during that time,” Powell said.
An industry insider told Lawyers Weekly that the reduction in title policies was driven by a substantial reduction in refinance volume. More restrictive lending guidelines have led to fewer credit options for borrowers, fewer loans being written and, consequently, fewer title insurance policies being written in conjunction with those loans.
Powell said the oversupply of houses, a reduced demand for real estate and a reduction in prices has pushed demand for title insurance down. At the same time, the increase in foreclosures has increased claims.
The industry saw a record number of claims in 2008.
But even as both direct premiums written and earned fell in 2009, insurers cut losses dramatically. Direct losses paid across the industry in North Carolina fell from $36.7 million in 2008 to $22.7 million in 2009, while 2008’s total of $51.2 million in direct losses incurred fell to $22.2 million in 2009.
That may signal a reduction in claims, an adjustment in the manner in which companies handle claims, a constricting of upfront requirements for the issuance of title insurance or some combination of those.
“Stewart tightened underwriting standards, improved in-house resolution of claims, reduced attorney claims through stricter approval standards and enhanced educational opportunities for agents,” Powell said. “Stewart expects a continued decline in losses for those reasons.”
The industry insider tied the reduction in claims to more stringent requirements regarding mechanic’s liens. Also, the insider said, financially troubled developers have entered bankruptcy. Those left standing are less likely to default on commercial loans. “Loans currently being made are resulting in fewer defaults,” he said. “Defaults tend to trigger claims.”
So a reduction in defaults has led to a reduction in claims, leading some to believe the worst of the market troubles may have passed.
Powell said Stewart is cautiously optimistic that with interest rates low and markets stabilizing, the company will be able to capitalize on new opportunities in the real estate industry.
Stewart’s direct premiums earned rose slightly in 2009, even as its direct losses incurred fell by over $1 million.
Fidelity added nearly $2 million to its direct premiums earned while its direct losses incurred fell by over $1 million.
While Investors’ direct premiums earned were down over $2 million from 2008, it cut its losses in half.
Chicago’s direct premiums earned fell by $1.5 million, but it too cut its losses by nearly half.
First American’s direct premiums fell while its direct losses incurred rose by over $1.5 million.
Direct title insurance premiums written and earned in North Carolina over the past nine years (in millions):
2009: $113 written and $114 earned
2008: $140 written and $145 earned
2007: $177 written and $168 earned
2006: $170 written and $160 earned
2005: $144 written and $141 earned
2004: $132 written and $127 earned
2003: $129 written and $115 earned
2002: $96 written and $87 earned
2001: $81 written and $71 earned
Source: The North Carolina Department of Insurance
