TDI Issues Notice of Hearing to Set Guaranty Assessment Recoupment Charge
The Texas Department of Insurance (TDI) published notice today for a hearing to take place on Sept. 7, 2017 regarding the Texas Title Insurance Guaranty Association (TTIGA) guaranty assessment recoupment fee. This hearing will address only the recoupment rate.
Rest assured that TLTA will keep you informed throughout this process and provide all the information needed for you to comply once any new assessment recoupment charge is established and an effective date set.
View the Full TDI Notice »
On February 7, 2017, TTIGA executed an assumption agreement with First National Title Insurance Company. Under the agreement, First National Title (FNTI) assumes TTIGA's liabilities for Southern Title Insurance policies. In March 2017, TTIGA assessed title insurers $6 million to pay for the assumption.
This assessment is essentially a loan from the underwriters to TTIGA to provide funds to pay FNTI to assume the liabilities of the failed underwriter. There is a mechanism in place, both in statute (Sec. 2602.210) and in regulation in P-30, for the underwriters to recoup these funds that have been assessed. The establishment of a Guaranty Assessment Recoupment fee (GARC fee) to be charged on each policy is part of that statutory and regulatory mechanism.
It's important to note that the statute allows for the GARC fee to be charged for one year, in the subsequent year after the assessment. In this case, the assessment was charged in 2017, so the GARC fee will be charged during the calendar year of 2018.
The public policy goal of the statute establishing this process is to ensure that consumers are able to have their title policies honored, even in the event of an underwriter insolvency. It's another reason why Texas has one of the strongest and best title products in the nation, providing consumers with maximum protection.
In 2013, TTIGA assessed Texas underwriters $2.5 million, based on estimates of the total claims liability of Southern Title, a regional underwriter that was licensed to do business for several years in Texas and later declared bankruptcy.
Once the amount of the assessment recoupment charge was established through the hearing process and an effective date was set, title agents were required to collect this fee, charged to consumers on each policy, and render it quarterly to TTIGA in a similar manner to the current "Guaranty Fee." This process was carried out once before in the early 1990s in connection with the failure of Title USA.