The role of title insurance under recording and registration

Benito Arruñada

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

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.

Keywords: Transaction costs; property rights; land titles; title insurance; real estate (search for similar items in EconPapers)
JEL-codes: G22 K11 L85 (search for similar items in EconPapers)
Date: 2001-07, Revised 2002-09
New Economics Papers: this item is included in nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:565

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