December 13, 2013

Guaranty Assessment Recoupment Fee Set at $1.80 Per Policy
Effective January 1, 2014

Texas Department of Insurance (TDI) Commissioner Julia Rathgeber issued an order today setting a Guaranty Assessment Recoupment (GARC). Beginning Jan. 1, 2014 though Dec. 31, 2014, title agents will be required to collect a GARC fee of $1.80 on each owner and loan policy. This fee must be rendered quarterly to the Texas Title Insurance Guaranty Association (TTIGA).

Exhibit B of the Commissioner's Order includes the Guaranty Assessment Recoupment Charge Remittance Form that title agents should use to remit the charge. You can view that form on page 10 of the Order here, or you can download it in Word format here.

While the GARC fee will function in a similar manner to the current Guaranty Fee, it's important to note that they are two different fees. The Guaranty Fee is being reduced from $2.00 to $0.00 beginning Jan. 1, 2014, and you can read more about that here.

The GARC fee is being established in connection with the failure of Southern Title Insurance Corporation, a regional underwriter that was licensed to do business for several years in Texas and later declared impaired by TDI. Earlier this year, TTIGA assessed Texas underwriters an amount based on estimates of the total claims liability of Southern Title. This assessment is essentially a loan from the underwriters to TTIGA to provide funds to pay the claims of a failed underwriter. The GARC fee is part of 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 original amount Texas underwriters were assessed, on a pro-rata share based on premiums written in the previous year, was approximately $8 million. However, the TTIGA Board of Directors recently voted to lower the assessment based on more recent estimates of claims that will need to be paid in the short-term, and some $5.5 million was refunded to the contributing underwriters. This left approximately $2.5 million that was the subject of the Nov. 15 hearing.

It's important to note that the statute allows for the GARC to be charged for one year, in the subsequent year after the assessment. If there are additional assessments on the underwriters by TTIGA, which is certainly possible if they are needed to cover more Southern Title claims, a separate hearing and recoupment fee process will occur and another fee will be established to be charged in a subsequent year. Also, remaining amounts not recouped through this assessment recoupment charge process can be reimbursed to the contributing underwriters through a premium tax credit over a longer period of time.  

The public policy goal of the statute establishing this process is to insure that consumers are able to have their title policies honored, even in the event of an underwriter insolvency. It is another reason why Texas has one of the strongest and best title products in the nation, providing consumers maximum protection.

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