Coinsurance/Reinsurance: A Different Means to a Similar End
By Gerald J. Castro
Vice President and National Commercial Counsel
Chicago Title Insurance Company, Chicago NCS office
Chicago Title Insurance Company is a leader within the title insurance industry, with revenues in excess of most of its competitors. But even the strongest title insurer has limits as to the amount that it can pay out on a single claim. Each title company's ability to pay claims is limited by its financial strength. In addition, however, each title company faces limits on the amount of liability it may assume under any policy or set of policies. These limits may be set by state law, customer request or internal controls. Notwithstanding these limits, the title insurance industry has developed a system that affords individual companies the ability to insure properties that have values in excess of limits, including those with values running into the hundreds of millions of dollars. As the amounts needed to acquire or invest in real estate continue to swell, so do the demands for increasing amounts of title insurance. To balance the difficulty of accommodating our customers while not overstepping our ability to react to potential claims, we enter into coinsurance or reinsurance agreements with other title insurers. These agreements enable one company to spread the risk of loss on large-liability policies to other companies. This article will define and explain coinsurance and reinsurance arrangements, increasingly significant aspects of the title insurance industry.
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