by Tory Barringer
of DSNews.com

The period’s underwriting combined ratio reached 90.7 percent, a level not seen since 2006.

“The title insurance industry is benefitting from an improving housing market that is showing less home inventory and increasing home prices nationally,” Fitch says in its report.

While mortgage originations are expected to fall off somewhat in 2013, Fitch notes that the drop will mostly be driven by a decline in refinance activity, which will be offset by growing purchase originations. As the agency points out, “purchase orders typically bring in twice the revenue of refinance orders for title insurers.”

Additionally, open order counts for title underwriters were 20 percent higher at third-quarter 2012 compared with the same period in 2011. According to Fitch, the order flow should provide a “strong pipeline of activity for the first half of 2013 and a cushion against a potentially weaker second half in an uncertain economic environment.” As a result, revenue is expected to grow in 2013, though at a more modest rate than in 2012.

While capital strength varies from company to company, Fitch says it continues to view the industry as “adequately capitalized.”

The biggest threat to the industry at this point, Fitch says, is Washington’s potential failure in avoiding the fiscal cliff. If that were to occur, economic growth would fall off drastically, leading to sustained mortgage and real estate market activity declines and a “return to sizeable title insurer operating losses and capital deterioration.”

On the other hand, if the cliff can be avoided and the housing market is allowed to grow further, Fitch anticipates an improvement in industry capitalization to historical levels.