Assurant 2012 Annual Report Download - page 14

ASSURANT, INC.2012 Form10-K6
PARTI
ITEM 1 Business
Products and Services
Assurant Specialty Property’s business strategy is to pursue long-term
growth in lender-placed homeowners insurance, and adjacent markets
with similar characteristics, such as renters insurance and resident bond
products (collectively “multi-family housing insurance products”) and
lender-placed  ood insurance. Assurant Specialty Property also writes
other specialty products.
Lender-placed and voluntary homeowners insurance
 e largest product line within Assurant Specialty Property is homeowners
insurance, consisting principally of  re and dwelling hazard insurance
o ered through our lender-placed programs.  e lender-placed program
provides collateral protection to lenders, mortgage servicers and investors
in mortgaged properties in the event that a homeowner does not
maintain insurance on a mortgaged dwelling. Lender-placed insurance
coverage is not limited to the outstanding loan balance; it provides
structural coverage, similar to that of a standard homeowners policy.
 e amount of coverage is based on the last known insurance coverage
under the prior policy for the property, and provides replacement cost
coverage on the property and thus ensures that a home can be repaired
or rebuilt in the event of damage. It protects both the lender’s interest
and the borrower’s interest and equity. We also provide insurance on
foreclosed properties managed by our clients.  is type of insurance
is Real Estate Owned (“REO”) insurance.  is market experienced
signi cant growth in recent years as a result of the housing crisis, but
is now stabilizing.
In the majority of cases, we use a proprietary insurance-tracking
administration system linked with the administrative systems of our
clients to monitor the clients’ mortgage portfolios to verify the existence
of insurance on each mortgaged property and identify those that are
uninsured. We earn fee income for these administrative services. If there is
a potential lapse in insurance coverage, we begin a process of noti cation
and outreach to both the homeowner and the last-known insurance
carrier or agent through phone calls and written correspondence.
 is process usually takes 75 days to complete. If coverage cannot be
veri ed at the end of this process, the lender procures a lender-placed
policy for which the homeowner is responsible for paying the related
premiums.  e percentage of insurance policies placed to loans tracked
represents our placement rates.  e homeowner is still encouraged,
and always maintains the option, to obtain or renew the insurance of
his or her choice.
To meet the changing needs of the lending and housing industries,
we are working with regulators to introduce a next generation lender-
placed homeowners product to address some of the unanticipated
issues that developed during the housing crisis.  is product combines
 exibility and best practices to address the concerns of various parties.
 e product contains expanded geographic ratings within each state to
further di erentiate rates for properties more exposed to catastrophes
from those where the risk is lower, added premium rating  exibility
from deductible options that can be modi ed based on factors such as
coverage amount and delinquency status, and continued enhancements
to our already extensive customer noti cation process to make it more
clear to borrowers when they have lender-placed insurance.
Lender-placed and voluntary manufactured housing
insurance
Manufactured housing insurance is o ered on a lender-placed and
voluntary basis. Lender-placed insurance is issued after an insurance
tracking process similar to that described above.  e tracking is performed
by Assurant Specialty Property using a proprietary insurance tracking
administration system, or by the lenders themselves. A number of
manufactured housing retailers in the U.S. use our proprietary premium
rating technology to assist them in selling property coverage at the
point of sale.
Other insurance
We believe there are opportunities to apply our lender-placed business
model to other products and services. We have developed products in
adjacent and emerging markets, such as the lender-placed  ood and
multi-family housing insurance products. We also act as an administrator
for the U.S. Government under the voluntary National Flood Insurance
Program, for which we earn a fee for collecting premiums and processing
claims.  is business is 100% reinsured to the U.S. Government.
Marketing and Distribution
Assurant Specialty Property establishes long-term relationships with
leading mortgage lenders and servicers.  e majority of our lender-
placed agreements are exclusive. Typically, these agreements have terms
of three to  ve years and allow us to integrate our systems with those
of our clients.
We o er our manufactured housing insurance programs primarily
through manufactured housing lenders and retailers, along with
independent specialty agents.  e independent specialty agents distribute
 ood products and miscellaneous specialty property products. Multi-
family housing products are distributed primarily through property
management companies and a nity marketing partners.
Underwriting and Risk Management
Our lender-placed homeowners insurance program and certain of our
manufactured housing products are not underwritten on an individual
policy basis. Contracts with our clients require us to issue these policies
automatically when a borrower’s insurance coverage is not maintained.
 ese products are priced to factor in the lack of individual policy
underwriting. We monitor pricing adequacy based on a variety of
factors and adjust pricing as required, subject to regulatory constraints.
Because several of our product lines (such as homeowners, manufactured
housing, and other property policies) are exposed to catastrophe risks,
we purchase reinsurance coverage to protect the capital of Assurant
Specialty Property and to mitigate earnings volatility. Our reinsurance
program generally incorporates a provision to allow the reinstatement
of coverage, which provides protection against the risk of multiple
catastrophes in a single year.