Escrow Theft: Today’s Challenge in Title Insurance

Columbus, Ohio, June 5, 2012:  Demotech, Inc. has published its study, Escrow Theft:  Today’s Challenge in Title Insurance.  This study observes the relationship between title insurance loss and loss adjustment expense ratios and the relative strength of state regulations for title insurance agents.

Demotech has monitored the problem of escrow theft within the industry and, in 2003, published its initial study on escrow theft, Defalcations:  Today’s Challenge in Title Insurance and Our Thoughts on Addressing This Challenge, in which it analyzed the impact of title insurance agent licensing requirements on escrow theft.    Over the past decade, Demotech has continued to observe the impact of escrow theft on the title insurance industry and has now updated its 2003 study.  This revised and expanded study sets forth Demotech’s current findings, analysis, and observations.

Using the NAIC Title Insurance Agent Model Act as the baseline, Demotech analyzed the relative strength of each state’s regulations for the licensing and oversight of title agents, and assigned each state a rating based on its interpretation of the state’s regulatory strength.  Demotech also compiled title insurance loss ratio data for each state over the past eight years.  Demotech found that states that had adopted the NAIC Model Act, its substantial equivalent, or a stronger set of regulations generally reported lower loss and loss adjustment expense ratios.  In Demotech’s opinion, the variations in loss ratios are related to less or more escrow theft, as well as the beneficial impact of strong licensing standards and increased professionalism.  Demotech concluded that the enactment of the NAIC Model Act, or a regulation of equivalent strength, can have a significant impact on title insurance losses—especially losses resulting from escrow theft.

The full study can be read here:  Escrow Theft:  Today’s Challenge in Title Insurance.

About Demotech, Inc.

Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers.  Since 1985, Demotech has served the insurance industry by assigning accurate, reliable and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurers and Title underwriters.  FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer.  Demotech’s philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size.  This philosophy was the catalyst for the Demotech Company Classification System, which was published in Insurance Journal, in order to stratify and categorize insurers into operational categories.  Visit for more information.