A Transaction-Cost View of Title Insurance in Different Legal Systems

Geneva Papers on Risk and Insurance, 2002, 27(4), 582-601

33 Pages Posted: 7 Nov 2002 Last revised: 23 Jul 2018

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2002

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, firm internationalization

JEL Classification: G22, K11, L85

Suggested Citation

Arruñada, Benito, A Transaction-Cost View of Title Insurance in Different Legal Systems (October 1, 2002). Geneva Papers on Risk and Insurance, 2002, 27(4), 582-601. Available at SSRN: https://ssrn.com/abstract=311444 or http://dx.doi.org/10.2139/ssrn.311444

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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