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Friday, November 24, 2017

Broker Guides | Insurance

The evolution of title insurance

Chris Taylor, CEO of Titlesolv | 11:42 Sunday 7th May 2017

Since its inception, title insurance has played a crucial role in a broad range of property transactions. It has provided security and confidence to borrowers and creditors alike, providing efficiency and consistency to transactions previously at risk of damaging irregularities.

Given the critical part this innovative financial product now plays in the industry, and as we appear to be entering a period of post-Brexit volatility, pointers for the future can be extrapolated from an examination of how it has historically adapted to meet the ever-evolving needs of clients.

The property boom of the late-1990s and early to mid-2000s is when non-traditional lenders began to emerge to assist with funding flows, as high street lenders struggled with overwhelming demands on their capacity. In this context, title insurance proved particularly useful to reduce title due diligence, which led to a reduction in overall transaction timelines. This marked the period when lenders began to embed the product in their operational processes in order to reduce transaction timetables and manage any title-related risks most effectively. This context also underscores the reason why Titlesolv introduced a six-month ‘cure or pay’ guarantee to its claims resolution.

When the market crashed following the 2008 financial crisis, banks and long-term lenders became understandably more risk-averse and severely reduced the size of their funding lines. Short-term lenders consequently began to supplement the funding gap that emerged, with the profile of title insurance evolving to become one of ‘deal enabler’ to such lenders. The unique selling point was now about providing a risk-free title, along with a more cost-effective service to clients, in order to enable short-term lenders to mirror high street lending practices and ultimately position themselves as future entrants into the long-term loan market.

Following the financial crisis, short-term lenders began to experience increased demand for loans on buy-to-let transactions and development sites as well. As a consequence, the market became increasingly exposed to title insurance, with the risk being met with a variety of new policies. A prominent example of this was Titlesolv’s developer policy, which enabled new forms of lending and addressed specific concerns of this particular market segment.

With the short-term lending industry facing greater regulation in recent years, title insurance now enables lenders to offset the costs incurred through increased regulatory compliance with innovative short-form title diligence processes. This has enabled cheaper and more efficient transactions, and added an effective risk management tool to the arsenal for lenders.

The market is ever-changing, and title insurance providers must be constantly ready to adapt if they are to adequately protect their clients. In such a precarious and fast-paced economic climate, constant engagement with the short-term lending industry is vital to better understanding its needs. Such engagement has enabled Titlesolv to maintain its market-leading position within the industry, providing intuitive, intelligent solutions to its lender clients.

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