Strong earnings for title insurers are expected to continue next year despite downside risk from inflation, according to Fitch Ratings’ 2022 outlook.
Title insurers benefit from record high capital, favorable profit margins and conservative asset allocation, which all support another strong year, Fitch Ratings said.
“Interest rates and employment levels still hold considerable sway over title insurers’ operating performance, both of which will continue to remain supportive of the industry in 2022,” Director Gerry Glombicki said in a release.
Underwriters could see margins and overall profits shrink somewhat from current peak levels, Fitch said.
Other key indicators Fitch cited for title insurers include mortgage interest rates, home building and sales activity, and housing price appreciation. Continued home price appreciation and favorable macro conditions kept title-related losses hovering at or near historic lows for the Big Four title underwriters this year. Additionally, statutory loss reserves continue to develop favorably.
A deterioration in economic growth or higher interest rates from rising inflation represent a potential headwind for title insurers, according to Fitch.
“A prolonged economic downturn that leads to falling wages and employment, rising property foreclosures and inhibits housing investment would be a negative for the industry,” Glombicki said. “That said, title insurers are currently better prepared for future downturns than they were leading into the 2008 financial crisis.”