The National Association of Independent Land Title Agents (NAILTA)
released a white paper advocating the use of a premium-to-surplus ratio
rule to help prevent escrow theft.
The white paper was written in
light of the National Association of Insurance Commissioners’ (NAIC)
efforts to draft a white paper to give regulators and insurers tools to
combat and prevent escrow theft. One of the suggestions put forth in a
recent draft of the NAIC Title Escrow Theft and Title Insurance Fraud
Whitepaper is the creation of escrow theft reserves at the title
underwriter level.
“The preliminary idea from NAIC is to
require insurers to contribute revenues to a separate escrow defalcation
reserve account apart from ordinary capital and SPR requirements,” the
paper stated. “The funding mechanism for the reserve would come either
from CPL income or by premium set-asides. The reserve would be used
solely for the payment of defalcation related losses. Although, unclear
from the paper, the cost to consumers is likely to increase in order to
pay for the reserve. These issues and more are currently being
determined by the affected title insurance underwriters, the American
Land Title Association and the NAIC.”