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

The New York State Department of Financial Services says it has reached agreements with the four remaining New York force-placed insurers that had not yet agreed to implement the reforms: American Modern Insurance, Chubb, Fidelity and Deposit Company of Maryland, a unit of Zurich, and FinSecure.

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

In the latest settlement, American Modern Insurance agreed to pay a $1 million penalty and restitution for homeowners who were harmed.

Benjamin Lawsky, DFS superintendent, said Chubb, Fidelity and Deposit Company of Maryland, FinSecure had each written relatively smaller volumes of force-placed insurance and were not found to have engaged in the kickback arrangements uncovered at other companies.

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

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

The earlier pacts also imposed other reforms. These include requiring that FPI underwriters may not pay contingent commissions based on underwriting profitability or loss ratios; provide free or below-cost, outsourced services to banks, servicers or their affiliates; make any payments—including the payment of expenses—to servicers, lenders, or their affiliates in connection with securing business.

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

The regulator of Fannie and Freddie proposing changes in how the system operates aimed at reducing the FPI costs for the two Government-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 home in Golden Beach, placed in an FPI program by J.P. Morgan Chase Bank, was charged $54,142.56, compared to the $5,007-a-year premium charged by its former insurer, state-run Citizens Property Insurance Corp.

The cost was added to the principal of the family's mortgage.

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

The lawsuits also name many of the bank affiliates as well as Assurant and QBE. The suits against Bank of America also cite Balboa as BAC's FPI insurer. Balboa was a subsidiary of Countrywide Financial when that company was acquired by BAC. Balboa was sold to QBE in 2011.

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

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

Special Reports /

N.Y. DFS, Force-Placed Insurers Reach Agreement on Reforms

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