California Insurance Commissioner John Garamendi said Tuesday that two of the state's largest title insurers have agreed to halt a kickback scheme that cost home buyers nearly $23 million, and said the insurers will pay $33.3 million in refunds and fines by way of restitution.Fidelity National Title and First American Title, the two firms that have agreed to settle, according to Garamendi, could not be reached for confirmation. A department staffer said settlement talks continued Tuesday night with a third firm, LandAmerica Financial, which allegedly had made $2.7 million in questionable payments in a practice known as "captive reinsurance."
In simple terms, big builders, lenders and real estate firms formed subsidiaries, called captive reinsurers. Ostensibly they were formed to share the risk of issuing the title policies. Title firms, in turn, paid these subsidiaries several hundred dollars each time an insurer issued a policy based on a referral from a subsidiary's parent company.