First American And The California Department Of Insurance Reach $5 Million Settlement Concerning Captive Reinsurance Agreements
|July 20, 2005|
SANTA ANA, Calif., First American Title Insurance Company has reached resolution with the California Department of Insurance ending an investigation by the department into the company’s captive reinsurance agreements. First American will pay a total amount of $5 million divided between a penalty and administrative and investigative expenses incurred by the Department of Insurance. The payment will result in a charge to earnings for the second quarter 2005 of approximately 5 cents per diluted share.
This action follows First American Title’s settlement with the Colorado Division of Insurance and the company’s voluntary action, disclosed in February 2005, to make payments totaling $24 million to affected policyholders in the eight states where First American Title had captive reinsurance agreements. This $24 million consumer payment included approximately $15 million paid to California policyholders whose policies were reinsured by First American Title. The company terminated all captive reinsurance agreements in February 2005.
“First American cooperated fully with the California Department of Insurance throughout its inquiry into this matter,” said James J. Dufficy, senior vice president and regulatory counsel for The First American Corporation. “This company took a historic step earlier this year when it elected to pay to consumers the reinsurance premiums originally paid to participants in the captive reinsurance arrangements. We believed that our actions, including the termination of our captive reinsurance practices and the voluntary payment of $24 million to First American’s affected customers, had resolved this issue. We were disappointed that the California Department of Insurance found it necessary to pursue this matter well after First American’s settlement with the Colorado Division of Insurance on the same subject; however, we are pleased to have reached a settlement in this matter without further dispute with the California Department of Insurance.”
Source: First American Title Insurance Company