Lawsky says the DFS is continuing its investigation, and encouraging other force-placed insurers and mortgage servicers operating in New York to adopt the reforms to which Assurant has agreed.

“New York stands ready and willing to assist any state that is considering moving ahead with similar reforms,” Lawsky said.

Regulations that will soon be issued by the agency will apply to all New York-licensed forced-placed insurers of properties in the state, says Lawsky.

Assurant agreed to limit premium so its maximum gross-profit-plus-expenses is limited to 38 percent of premiums, Lawsky explains.

It will also be required to pre-file its rates for review every three years, and to re-file its rates for the next year if its actual rates in any year result in an actual loss ratio of less than 40 percent for the immediately preceding calendar year.

It must also report annually to DFS on its actual loss ratio, earned premiums, itemized expenses, losses, and reserves.

New York, California and Florida have led a recent effort to reduce the cost of force-placed insurance to distressed homeowners hurt by the recent downturn in the economy.

California is pressuring insurers to cut rates, including Assurant and QBE. QBE recently agreed to reduce rates by 35 percent effective March 15.

Investigative hearings have been held in New York and Florida on the issue, and the NAIC has held hearings on the issue, and sought to have insurance departments nationwide re-examine their policies as well as the cost of this type of insurance in each state.

The DFS statement said its probe had found that Assurant competed for business from the banks that were foreclosing on distressed properties, and mortgage servicers of these properties, through what is known as “reverse competition.”

That is, rather than competing by offering lower prices, the insurers competed by offering what is effectively a share in the profits, Lawsky's statement says.

Regarding the rebate program with New York, Robert Byrd, a spokesman for Assurant in Atlanta, says the company's force-placed subsidiaries agreed to participate, “as it has always been our policy to issue refunds in the event a policyholder was somehow charged erroneously.”