Reinsuring title insurance is an opportunity for captive owners to expand utilisation and profit from a new line of insurance, according to Clinton Casabella, a title reinsurance expert in the United States, and SVP of business development at Grid151.
Casabella works with Westcor Specialty to sell title insurance to corporates and is now also working with captive owners to help them implement their own title reinsurance programmes.
When a real estate transaction happens, a set of documents, such as a deed and a mortgage are signed by either the buyer, the seller, or both, and those documents are then placed on public record.
“Those recorded documents are indexed and catalogued to a particular property, so when reviewed in reverse chronological order, become what’s known as the ‘chain of title,’” Casabella said, speaking on episode #103 of the Global Captive Podcast.
The job of title insurance professionals is to search the public record, examine that chain of ownership over time and ensure that it is unbroken and without defect.
“Title insurance is, therefore, a type of indemnity insurance, which insures against financial loss from defects in the chain of title to real property and from the unenforceability of mortgages and other liens,” Casabella said.
“With most insurance, a client is paying a recurring premium to cover against something that might happen in the future, whereas with title insurance a premium is paid to cover for anything that may have happened in the past, which could threaten the ownership of the property that you’re purchasing or lending on.”
Casabella said title insurance would be of interest for captive owners who buy or sell real estate frequently, in addition to those who do real estate financing, as well as other players in the real estate market.
“This is an opportunity for captive owners to expand the utilisation of their captive by reinsuring a new class of business and reaping the same advantages and benefits that they’ve experienced in reinsuring the more established traditional risks,” he said.
Casabella said that compared to other lines title insurance loss rate ratios are relatively low at less than 5%.
He said Westcor’s current captive programme works on a quota share basis, with the company working with partners to do preliminary work specific to a client’s book of business.
“We’ll look at their book of business and estimate the amount of premium running through the programme in the first year, and work with actuaries on expected claims, losses, and then we’ll use that to generate the required upfront collateral and so on,” Casabella added