All force-placed insurance firms doing business in New York havenow agreed to put in place reforms that will substantively reducecost of the coverage to homeowners.

The New York State Department of Financial Services says it hasreached agreements with the four remaining New York force-placedinsurers that had not yet agreed to implement thereforms: American Modern Insurance, Chubb, Fidelity andDeposit Company of Maryland, a unit of Zurich, and FinSecure.

They join Assurant and QBE in agreeing with New York regulatorsto reduce rates significantly and report annually to the DFS thefinances of their FPI product. Assurant and QBE control 90 percentof the New York FPI market.

In the latest settlement, American Modern Insurance agreed topay a $1 million penalty and restitution for homeowners who wereharmed.

Benjamin Lawsky, DFS superintendent, said Chubb, Fidelity andDeposit Company of Maryland, FinSecure had each written relativelysmaller volumes of force-placed insurance and were not found tohave engaged in the kickback arrangements uncovered at othercompanies.

Lawsky said they had all agreed to sign proactive codes ofconduct implementing New York's reforms.

The Assurant and QBE agreements mandate that the companies mustfile with DFS a premium rate with a permissible loss ratio of 62percent; re-file its rates with DFS for review every three years;re-file its rates should they result in an actual loss ratio ofless than 40 percent for the prior calendar year; and reportannually to DFS on its actual loss ratio, earned premiums, itemizedexpenses, losses, and reserves.

The earlier pacts also imposed other reforms. These includerequiring that FPI underwriters may not pay contingent commissionsbased on underwriting profitability or loss ratios; provide free orbelow-cost, outsourced services to banks, servicers or theiraffiliates; make any payments—including the payment of expenses—toservicers, lenders, or their affiliates in connection with securingbusiness.

The FPI industry is also under federal regulatory scrutiny andan emerging class action lawsuit battleground.

The regulator of Fannie and Freddie proposing changes in how thesystem operates aimed at reducing the FPI costs for the twoGovernment-Sponsored Enterprises.

The class action lawsuits have been filed mainly in California,New York and Florida.

For example, in one lawsuit filed in Miami, a couple with a homein Golden Beach, placed in an FPI program by J.P. Morgan ChaseBank, was charged $54,142.56, compared to the $5,007-a-year premiumcharged by its former insurer, state-run Citizens PropertyInsurance Corp.

The cost was added to the principal of the family'smortgage.

Earlier this week, Judge Federico Moreno, chief of the federaldistrict court in Miami, agreed to hear this year class actionlawsuits dealing with FPI filed against J.P. Morgan Chase, Bank ofAmerica, Citibank, HSBC Bank USA and Wells Fargo.

The lawsuits also name many of the bank affiliates as well asAssurant and QBE. The suits against Bank of America also citeBalboa as BAC's FPI insurer. Balboa was a subsidiary of CountrywideFinancial when that company was acquired by BAC. Balboa was sold toQBE in 2011.

Florida is a hotbed for the lawsuits, because the staterepresents 75 percent of the FPI market.

And, on May 13^th, Wells Fargo and QBE agreed tosettle a lawsuit dealing with force-placed insurance policies inFlorida involving 24,000 borrowers. The companies will pay $19.3million to compensate the borrowers.