This bulletin advises you of the practices and requirements of Stewart Title Guaranty Company (the “Company”) for requesting and obtaining reinsurance.
Reinsurance is the means by which a title insurance underwriter spreads the risk of loss to more than one underwriter. The underwriter laying off reinsurance - the offeror (the “Ceder”) - must obtain approval from another underwriter - the offeree (the “Reinsurer”) – and compensate the Reinsurer to accept some portion of the risk. Depending on the transaction, the Company may be a Ceder or a Reinsurer.
Reinsurance is offered, negotiated, and accepted through the Reinsurance Department. Issuing Offices should never directly contact another reinsurance department or arrange reinsurance with another company.
Reinsurance of a title insurance policy to be written by the Company may be required in any transaction; for example, at the request of a customer, or where a policy exceeds the Company’s self-imposed or state statutory single-risk retention limits. In transactions where the Company is the Ceder, customers may occasionally request specific reinsurers and amounts of reinsurance. These are accommodated to the extent practicable. However, Issuing Offices are not authorized on their own initiative to designate the reinsurer(s) or determine the amount of reinsurance to be offered. These, as well as the cost of reinsurance (the payment to the reinsurer), are negotiated by the Reinsurance Department. Nevertheless, requests made by Issuing Offices relating to amounts and reinsurers will be considered and accommodated where appropriate.
Reinsurance approval vs. Overlimits approval
Reinsurance approval is different from Overlimits approval. Overlimits approval is not a substitute for Reinsurance approval, and Reinsurance approval is not a substitute for Overlimits approval.
Overlimits approval is the Company’s determination regarding the requested title insurance. Overlimits approval from the Company is requested by submitting a STG Request for Approval to Issue Overlimits (Large) Policy of Extra Hazardous Coverage (the “Overlimits Form”) to Stewart Legal Services. Overlimits approval is required before reinsurance can be requested.
Reinsurance approval is another underwriter’s determination regarding the requested title insurance and the cost to be paid to undertake that risk. Reinsurance approval is requested by submitting a request to the Reinsurance Department. The approved Overlimits Form is part of the documentation (listed below) required to request and obtain reinsurance.
Before the transaction closes
If you are requesting reinsurance, please provide the Reinsurance Department with the following before the closing:
(1) a copy of the completed signed and approved Overlimits Form;
(2) a copy of the commitment or preliminary report, and pro forma, if any;
(3) a concise but complete description of the transaction; and
(4) a list of requested endorsements.
If any ALTA form or other standardized form is modified or any other form is used, an explanation should accompany a copy of that form.
Offerees of reinsurance require an opportunity to review the transaction thoroughly, and they may request additional information before making a determination regarding reinsurance. Accordingly, if you believe that reinsurance may be required in a transaction, please contact the Reinsurance Department as early as possible. In order to avoid closing delays, please provide sufficient time for reinsurance review and approval by the potential Reinsurer - preferably five (5) business days, but no less than 24 hours.
If reinsurance is required and not yet obtained, all commitments issued prior to such determination must contain the following exception in Schedule B:
"Receipt of reinsurance commitments which are satisfactory to the Company."
Upon acceptance of the reinsurance offered, the Reinsurer will send to the Company a reinsurance acceptance letter. This letter is a binding agreement to reinsure that which was disclosed in the Ceder’s (the Company’s) offer. The Reinsurance Department will forward to the Issuing Office a copy of the acceptance letter and an invoice for the reinsurance premium. An Issuing Office should not pay any Reinsurer directly. Audit procedures require that the Reinsurance Department pay each Reinsurer.
If there are any changes – to the requested policy or to any material aspect of the transaction - that occur subsequent to an initial request for reinsurance and before the closing, you must promptly advise the Reinsurance Department. These must be disclosed to reinsurers.
If the transaction cancels, please advise the Reinsurance Department so that they can cancel the reinsurance and avoid any charges.
After the transaction closes
After the closing, the Issuing Office must promptly forward a copy of all title policies, including all endorsements, to the Reinsurance Department, together with the payment of the reinsurance premium. The Reinsurance Department will forward these to the Reinsurer, and will arrange for Reinsurance Agreements to be signed by the Company and the Reinsurer. Upon receipt of fully executed Reinsurance Agreements, the Reinsurance Department will forward copies of these Agreements to the Issuing Office for your file and for forwarding to the Insured.
Any changes to a policy after the closing require disclosure to and approval by the Reinsurer. These changes include, but are not limited to: date downs, modifications, changes in collateral, releases, endorsements, etc. You should not assume that the Reinsurer’s approval of post-closing changes will be automatic or without cost. Fees payable to a reinsurer for post-closing changes may range from a modest service fee to a significant percentage of the original reinsurance premium.
All requested changes to a policy after closing must be submitted to the Reinsurance Department for approval by the Reinsurer before such changes can be implemented. Please allow adequate time to obtain such reinsurance approval.
Executive Management Reporting
All policies equal to or exceeding $25 Million which include mechanic’s lien coverage during construction, and all policies equal to or exceeding $100 million must be reported to Management even if reinsurance is not requested or obtained. The Reinsurance Department prepares this report. You must include the Reinsurance Department in the Overlimits approval process, as early as possible, on these transactions.
If you are requesting reinsurance or have questions relating to reinsurance, or if you have a transaction that requires reporting to Management, please contact Lynne Demarest at 713-625-8219 or by email at email@example.com.
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
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