Title insurance is a type of insurance that protects investors in a securitisation from losses that may arise from defects in the title to the underlying assets. In Australian English, title insurance is sometimes referred to as "title indemnity insurance".
Title insurance is typically purchased by the issuer of the securitisation, and it covers the investors in the securitisation against losses that may arise from defects in the title to the underlying assets, such as:
- Forged or fraudulent documents
- Unrecorded liens or encumbrances
- Unregistered interests
- Adverse possession
Title insurance can also cover the investors in the securitisation against losses that may arise from errors or omissions in the title search.
Title insurance is an important tool for protecting investors in a securitisation from losses that may arise from defects in the title to the underlying assets. It can provide peace of mind to investors, knowing that they are protected against unexpected losses.
Here are some of the applications of title insurance in securitisation:
- To protect investors: Title insurance protects investors in a securitisation from losses that may arise from defects in the title to the underlying assets.
- To manage credit risk: Title insurance can be used to manage credit risk. For example, an issuer may require that the underlying assets be insured by a title insurer before the securitisation is issued. This will help to protect the securitisation from losses if there are defects in the title to the underlying assets.
- To create new products: Title insurance can be used to create new securitization products that meet the needs of different investors. For example, an issuer may issue a securitization with a different type of underlying asset, such as receivables or intellectual property. The title insurance will need to be adapted to the specific type of underlying asset.
Title insurance is sometimes referred to as "title indemnity insurance".