Assurant 2014 Annual Report Download - page 39

ASSURANT, INC. – 2014 Form 10-K 25
PART I
ITEM 1A Risk Factors
Risks Related to Our Industry
We are subject to extensive laws and
regulations, which increase our costs and could
restrict the conduct of our business.
Our insurance and other subsidiaries are subject to extensive
regulation and supervision in the jurisdictions in which they
do business. Such regulation is generally designed to protect
the interests of policyholders or other customers. To that
end, the laws of the various states and other jurisdictions
establish insurance departments and other regulatory bodies
with broad powers over, among other things: licensing and
authorizing the transaction of business; capital, surplus and
dividends; underwriting limitations; companies’ ability to enter
and exit markets; statutory accounting and other disclosure
requirements; policy forms; coverage; companies’ ability to
provide, terminate or cancel certain coverages; premium
rates, including regulatory ability to disapprove or reduce
the premium rates companies may charge; trade and claims
practices; certain transactions between affi liates; content
of disclosures to consumers; type, amount and valuation of
investments; assessments or other surcharges for guaranty
funds and companies’ ability to recover assessments through
premium increases; and market conduct and sales practices.
For a discussion of various laws and regulations affecting
our business, please see Item 1, “Business — Regulation.”
If regulatory requirements impede our ability to conduct
certain operations, our results of operations and fi nancial
condition could be materially adversely affected. In addition,
we may be unable to maintain all required licenses and
approvals and our business may not fully comply with the
wide variety of applicable laws and regulations or the relevant
regulators’ interpretation of these laws and regulations.
In such events, the insurance regulatory authorities could
preclude us from operating, limit some or all of our activities,
or fi ne us. Such actions could materially adversely affect our
results of operations and fi nancial condition.
Our business is subject to risks related to
litigation and regulatory actions.
From time to time, we may be subject to a variety of legal
and regulatory actions relating to our current and past
business operations, including, but not limited to:
•
actions by regulatory authorities that may restrict our ability
to increase or maintain our premium rates, require us to
reduce premium rates, imposes fi nes or penalties and result
in other expenses;
•
market conduct examinations, for which we are required
to pay the expenses of the regulator as well as our own
expenses, and which may result in fi nes, penalties, or other
adverse consequences;
•
disputes regarding our lender-placed insurance products
including those relating to rates, agent compensation,
consumer disclosure, continuous coverage requirements,
loan tracking services and other services that we provide
to mortgage servicers;
•disputes over coverage or claims adjudication;
•
disputes over our treatment of claims, in which states or
insureds may allege that we failed to make required payments
or to meet prescribed deadlines for adjudicating claims;
•
disputes regarding sales practices, disclosures, premium
refunds, licensing, regulatory compliance, underwriting
and compensation arrangements;
•
disputes with agents, brokers or network providers over
compensation and termination of contracts and related
claims;
•
disputes alleging bundling of credit insurance and warranty
products with other products provided by fi nancial institutions;
• disputes with tax and insurance authorities regarding our
tax liabilities;
•
disputes relating to customers’ claims that the customer
was not aware of the full cost or existence of the insurance
or limitations on insurance coverage; and
•
industry-wide investigations regarding business practices
including, but not limited to, the use and the marketing of
certain types of insurance policies or certifi cates of insurance.
The premiums we charge are subject to review by regulators.
If they consider our loss ratios to be too low, they could
require us to reduce our rates. Signifi cant rate reductions
could materially reduce our profi tability.
Lender-placed insurance products accounted for approximately
71% and 73% of Assurant Specialty Property’s net earned
premiums for the twelve months ended December 2014
and 2013, respectively. The approximate corresponding
contributions to segment net income in these periods were
73% and 87%. The portion of total segment net income
attributable to lender-placed products may vary substantially
over time depending on the frequency, severity and location
of catastrophic losses, the cost of catastrophe reinsurance and
reinstatement coverage, the variability of claim processing
costs and client acquisition costs, and other factors. In
addition, we expect placement rates for these products
to decline.
The Company fi les rates with the state departments of
insurance in the ordinary course of business. In addition to
this routine correspondence, from time to time the Company
engages in discussions and proceedings with certain state
regulators regarding our lender-placed insurance business.
The results of such reviews may vary. As previously disclosed,
the Company has reached agreements with the New York
Department of Financial Services (the “NYDFS”), the Florida
Offi ce of Insurance Regulation (the “FOIR”) and the California
Department of Insurance regarding the Company’s lender-
placed insurance business in those states. It is possible
that other state departments of insurance and regulatory
authorities may choose to initiate or continue to review