The New York Department of Financial Services has entered into
The deal calls for restitution for homeowners, a $10 million penalty paid to the State of New York, and a set of reforms similar to ones agreed to last month by Assurant Inc.
DFS said between the two deals 90% of all force-placed policies in New York are covered by the settlements’ terms.
QBE acquired Balboa from Bank of America in June 2011, which in turn had assumed ownership as a result of the Countrywide transaction. Balboa was used by Countrywide for force-placed policies in its mortgage servicing portfolio.
In its statement, QBE said the settlement is not an admission of liability nor a judicial finding. It elected to settle to “avoid protracted litigation,” the company’s chief legal officer Pete Maloney said.
According to DFS, from 2009 to 2011, QBE’s actual loss ratios for force-placed hazard insurance in New York were 18.2%, 18.5% and 13.5%, respectively. The loss ratios were “substantially below the 55% expected loss ratio QBE filed” with the state’s Insurance Department, DFS’ predecessor.
In addition, DFS alleged QBE paid contingent “profit” commissions to its affiliated program manager QBE FIRST when loss ratios were kept below a certain figure. “This creates a troubling incentive for QBE FIRST to keep loss ratios as low as possible,” the agency said.
But QBE said the payments are permissible under New York law.
QBE North America CEO David Duclos said, “QBE is pleased to have resolved this matter. We value our regulatory relations in the U.S. and remain very engaged and cooperative with all our 50 U.S. state regulators and federal agencies that regulate mortgages. As a relatively new entrant to the U.S. lender-placed insurance market, we are keenly interested in determining its future shape and course.
“With this settlement completed our management team can now return its full attention to growing our overall U.S. insurance business.”
