Bank of America has agreed to sell the lender-placed and voluntary property and casualty insurance assets and liabilities of Balboa Insurance Company to QBE Insurance Group of Australia.
Lender-placed insurance is generally defined as an insurance policy taken out by the creditor on an asset when the property owner fails to maintain their own hazard insurance coverage. Lenders take out forced place policies to protect their investments in the event the collateral is damaged or destroyed.
BofA inherited Balboa Insurance when it purchased Countrywide Financial Corp., which acquired the company in 1999.
Bank of America and its affiliates are expected to receive an upfront cash payment of approximately $700 million
for the deal with QBE, as well as additional future payments, according to a statement from the North Carolina-based bank.
Under terms of the agreement announced late Thursday, QBE will assume substantially all of the insurance liabilities of Balboa in exchange for QBE's acquisition of an equivalent amount of cash and other assets through a reinsurance transaction with Balboa.
In addition, QBE will acquire certain other assets of the Balboa business and will extend ongoing employment to those associates supporting these businesses, according to BofA.
QBE and Bank of America also agreed to enter into a 10-year distribution agreement for lender-placed insurance and real estate owned (REO) programs and certain voluntary consumer insurance products.
The transaction is subject to regulatory approvals and is expected to be completed in mid-2011.
QBE is also the parent company of Sterling National, a provider of lender placed hazard insurance tracking and outsourcing services, headquartered in Atlanta, Georgia.
""The distribution agreement with Bank of America in the U.S. and the portfolio transfer provide QBE with a specialist personal lines portfolio, which is complementary to the Sterling National business acquired in 2008,"" said QBE CEO Frank O'Halloran.