LandAmerica Financial Group Inc., a title insurer under investigation in California, said it would cease the reinsurance arrangements that prompted the probe.
California Insurance Commissioner John Garamendi said Tuesday that the arrangements essentially served as kickbacks to builders who referred clients to LandAmerica and a second insurer, Fidelity National Financial Inc. On Wednesday, LandAmerica, based in Richmond, Va., said Garamendi's statements were "untrue and misleading."
"LandAmerica's captive reinsurance arrangements have not resulted in any injury to consumers," said Michelle Gluck, LandAmerica's general counsel. The company will stop the arrangements out of a "good faith willingness to resolve this issue."
Garamendi said title insurers paid kickbacks by setting up reinsurance companies in the name of a builder or lender and then sharing some of their premiums with those start-ups. The builder may have taken little or no insurance risk while getting a percentage of premiums, he said. Meanwhile, the kickbacks drove up the cost of insurance, he said.