OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. title insurance industry recorded a fifth straight year of favorable underwriting performance, aided by reduced expenses and moderate losses, according to a new A.M. Best special report.
The state of the current housing market environment, ongoing uncertainty about potential regulatory changes that could affect the mortgage and title insurance sectors and the slowly strengthening economy all factor into A.M. Best maintaining a stable outlook on the title insurance sector.
The Best’s Special Report, titled, “Title Sector Withstands Challenges, for Another Year of Strong Operating Performance,” states that due to the sector’s consistent and positive underwriting and operating performance, and the expectation that the majority of Credit Rating actions on title insurers will be affirmations, A.M. Best is maintaining a stable outlook on the industry. The title industry’s composite ratio (referred to as the combined ratio in the U.S. property/casualty industry) deteriorated slightly in 2016, to 93.3% from 92.6% in 2015; however, the 4.7% loss ratio in 2016 was the industry’s lowest in 11 years.
Title insurance direct premiums written (DPW) increased by 8.7% in 2016 to $13.8 billion from $12.7 billion in 2015, notably lower than the 16.1% DPW growth generated in 2015. The report notes that title premiums were likely impacted by the steady—if somewhat slowing—growth in the U.S. housing markets during the year due to an improved job market, and despite the slowdown in the construction of single-family housing and rising interest rates.
However, U.S. student loan debt, which has increased substantially during the past decade to approximately $1.4 trillion in 2017, is hindering millennials’ ability to buy homes.
In A.M. Best’s opinion, the ability of title insurers to maintain favorable operating results at or near the levels of recent years will depend largely on the length of time and the extent of the housing market recovery. Nonetheless, over the short term, the key drivers of the housing market and the economy in general will be Federal Reserve policy and the possibility of rising interest rates; continued tightening of the labor markets, which would lead to greater wage growth; and growing uncertainty about U.S. government policy.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=266647.
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