NU Online News Service, Nov. 9, 1:09 p.m.EDT

The National Association of Insurance Commissioners has decidedto ramp up its oversight of title insurers.

The problem stems from problems at small and regional titlecompanies, not the four large title companies, according to PaulBauer, a vice president and senior credit officer on the insuranceteam at Moody's Investors Service.

Bauer, who covers three of the large title insurers, says thelarger ones are more prepared to weather the current storm causedby the housing crisis than the small ones.

“They have more scale and more flexibility from acost-management standpoint,” he says.

He adds that title insurers are “different from other [propertyand casualty] insurers because a lot of what needs to be done isexpense management.”

The NAIC's decision for increased oversight was made by theTitle Insurance Task Force at the NAIC's Fall National Meeting,which ended here Sunday.

The decision follows the failure of three title insurancecompanies so far in 2011.

The task force plans to work with other NAIC working groups tomodernize solvency regulation of the industry. These efforts willinclude looking at recent industry failures, developing risk-basedcapital requirements, early warning tools, and risk-focusedexamination guidelines.

The core title insurance industry problem is that it “continuesto deal with the aftermath of the great housing price bubble andits painfully slow deflation,” Bauer says in an April report.

He adds, “We expect title insurance companies to be challengedover the medium term by a shrinking revenue base and lower incomedue to a drop in mortgage refinancings accompanied by only a mild,if any, uptick in overall home-sale transactions.”