The title industry's 2007 combined ratio, at 100.6, becameunprofitable for the first time in 17 years, with the industryexperiencing an $84.5 million underwriting loss, A.M. Best Co. saidin a report.

And the Oldwick, N.J.-based insurance rating firm said thedeterioration in the title industry's revenues and profitability in2007 and the first half of 2008 is likely to be accelerating in thesecond half of 2008.

Best said title insurers are struggling with the significantslowdown in the housing market and increased claims activity fromhigher home foreclosures.

According to the firm, any improvement in profitability willdepend largely on the length and depth of the housing downturn, theavailability of credit and the ability of title insurers toaggressively reduce expenses in alignment with the decreasedrevenue levels.

Among other points the report on the title sector makes:

o Due to inadequate loss reserving practices earlier in thedecade, incurred claims are rising. Higher claims activity also iscoming from agent-related fraud activity, generally involvingembezzlement of funds held in escrow.

o The industry's expense ratio increased modestly as premiumrevenues and transactions declined. Commissions and generalexpenses incurred as part of the title search process typicallymake up 85 percent or more of premium volume.

o As of August 2008, there were 4.91 million existing homes forsale, or 10.4 months of supply at current sales rates. While salesand prices may rebound sooner, housing starts and permits areexpected to continue declining through 2009 because of the level ofinventory.

o With shrinking demand and excess inventory, U.S. privatelyowned housing starts on an annual basis in August dropped to apreliminary 895,000 units, 33.1 percent lower than in August2007.

The special report, "Title Insurers Feel The Pain As HousingMarket Ills Continue," is available for $15 by contacting Bestcustomer service at (908) 439-2200, ext. 5742. BestWeek subscriberscan download it free from the publication Web site.