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The role of title insurance under recording and registration

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Abstract

This article outlines a transaction cost theory of ‘title insurance’ and analyses the role it plays in countries with recording and registration of land titles. Title insurance indemnifies real estate right holders for losses caused by pre-existing title defects that are unknown when the policy is issued. It emerged to complement the ‘errors and omissions’ insurance of professionals examining title quality. Poor organization of public records led title insurers in the USA to integrate title examination and settlement services. Their residual claimant status motivates insurers to screen, cure and avoid title defects. Firms introducing title insurance abroad produce little information on title quality, however. Their policies are instead issued on a casualty basis, complementing and enforcing the professional liability of conveyancers. Future development in markets with land registration is uncertain because of adverse selection, competitive reactions from established conveyancers and the ability of larger banks to self-insure title risks.

Suggested Citation

  • Benito Arruñada, 2001. "The role of title insurance under recording and registration," Economics Working Papers 565, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2002.
  • Handle: RePEc:upf:upfgen:565
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    1. Roland Kirstein, 2000. "Risk Neutrality and Strategic Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(2), pages 251-261, April.
    2. Kevin E. Villani & John Simonson, 1982. "Real Estate Settlement Pricing: A Theoretical Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(3), pages 249-275.
    3. Nyce, C. & Boyer, M.M., 1998. "An Analysis of the Title Insurance Industry," Ecole des Hautes Etudes Commerciales de Montreal- 98-14, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    4. Deborah Ann Ford, 1982. "Title Assurance and Settlement Charges," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(3), pages 297-312.
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    More about this item

    Keywords

    Transaction costs; property rights; land titles; title insurance; real estate;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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