QBE North America will pay a $US10 million ($9.7 million) civil penalty and reimburse homeowners as part of a settlement over force-placed insurance.

Its agreement with the New York State Department of Financial Services also includes conditions on the business’ future loss ratio and dealings with affiliates.

Force-placed insurance is taken out by a lender when the borrower does not maintain mortgage insurance and is often costly due to the relationship between mortgage servicers and their affiliates and commissions paid by the insurers.

The department’s investigation found losses are low, but homeowners are charged premiums two to 10 times higher than voluntary insurance and often get less protection.

The settlement will not be a material event for QBE – which it would have to report to the Australian Securities Exchange – and the insurer has made no admission of liability.

QBE became embroiled in the scandal after it bought Bank of America’s force-placed insurance arm Balboa in 2011.

Under the settlement it will be allowed a loss ratio of 62%, which it must annually report along with earned premiums, expenses, losses and reserves.

It cannot issue the insurance on property serviced by a bank or servicer affiliated with QBE, and there are restrictions on commissions.

Refunds will be provided to qualifying consumers through a claims process and a third-party administrator that is selected by the state department and paid for by QBE.

Last month the department reached a settlement with Assurant, which, with QBE, provides 90% of the state’s force-placed coverage.