Title Insurance to Recover in 2009 or Later?

The title insurance industry will not show significant improvement until 2009 at the earliest, a report from Fitch Ratings, New York, said."Fortunately, industry participants took advantage of prosperous years between 2002 and 2005 to strengthen balance sheets and should weather the current down cycle," the rating agency said in its "Review and Outlook 2007-2008: Title Insurance Industry." Fitch noted that for the six publicly traded title insurance underwriters, the average combined ratio worsened by 350 basis points to 101.8% at the end of the third quarter. The report claims "the real story" behind the problems with title insurers is the decline in operating margins, from 6.6% in 2006 to 2.3% this year. Where the subprime crisis affects the title insurance business is in fraud situations, where a default is more likely to result in a claim against a title insurer, Fitch said. Because title insurer resources were stretched thin during the refinance boom, the likelihood that thorough underwriting procedures for policies were not followed increased, it noted.