Residual value insurance
A residual value insurance policy is designed to underwrite valuations of assets at the date of termination of a lease or other type of financing arrangement. Potential beneficiaries of such policies are predominantly providers of asset finance or manufacturers. However business owners and shareholders can also be seen to be potential beneficiaries as shareholder value can be protected or enhanced if balance sheet asset values are protected in this way.
The policy itself could perhaps be better described as a financial hedging instrument rather than a typical insurance policy and its primary purpose is to support asset financing transactions.
It only exists to guarantee the difference between an anticipated residual value and an actual residual value and thus removes asset risk from the equation as far as funding institutions are concerned.
A variety of assets can be insured in this manner including commercial property. Because the existence of such a policy means that lending risk is reduced it may assist in obtaining improved credit terms as well as offering a degree of protection for any lease balloon payments which may be included as part of the overall finance transaction.
[edit] Related articles on Designing Buildings Wiki
- 3D animation for insurance risk analysis.
- Collateral warranties.
- Contractors' all-risk insurance.
- Contract works insurance.
- Directors and officers insurance.
- Environmental Impairment Liability (EIL).
- Flood insurance.
- Gross development value.
- Insurance.
- Latent defects insurance.
- Professional indemnity insurance.
- Professional Indemnity Insurance clause in conditions of engagement.
- Residual valuation.
Featured articles and news
For the World Autism Awareness Month of April.
70+ experts appointed to public sector fire safety framework
The Fire Safety (FS2) Framework from LHC Procurement.
Project and programme management codes of practice
CIOB publications for built environment professionals.
The ECA Industry Awards 2024 now open !
Recognising the best in the electrotechnical industry.
Sustainable development concepts decade by decade.
The regenerative structural engineer
A call for design that will repair the natural world.
Buildings that mimic the restorative aspects found in nature.
CIAT publishes Principal Designer Competency Framework
For those considering applying for registration as a PD.
BSRIA Building Reg's guidance: The second staircase
An overview focusing on aspects which most affect the building services industry.
Design codes and pattern books
Harmonious proportions and golden sections.
Introducing or next Guest Editor Arun Baybars
Practising architect and design panel review member.
Quick summary by size, shape, test, material, use or bonding.
Types of rapidly renewable content
From forestry to agricultural crops and their by-products.
Terraced houses and the public realm
The discernible difference between the public realm of detached housing and of terraced housing.