Residual value insurance
To help develop this article, click 'Edit this article'.
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] Find out more
[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.
- Insurance.
- Latent defects insurance.
- Professional indemnity insurance.
- Professional Indemnity Insurance clause in conditions of engagement.
- Residual valuation.
Featured articles and news
It was the tallest structure in the world for 3,800 years, but to this day the exact construction techniques are a mystery.
Shortlist for the industry's most coveted award announced.
Government responds to Mark Farmer's review of industry, rejecting the call for a levy on clients.
Peter Hansford to examine what wider lessons can be learned from the fire.
Every project is subject to uncertainty. How can construction better understand uncertainty for performance improvement?
MAD Architects reveal their designs for a futuristic campus for electric car manufacturer.
Homebuyers could borrow more with better forecasting of energy bills, according to industry consortium's new report.
Read our introductory article on carbon capture and storage.
Have a look at Frank Gehry's Binoculars Building in Los Angeles.
BRE publish new Loss Prevention Standard seeking to minimise fire risk from ducting.
Beneficial infrastructure projects
How do we tell which infrastructure projects will work?
CIAT announce the establishment of a Working Group in light of Grenfell and call for contributions.
In 1900, 15% of global population lived in cities. Now it’s over 50%. Which is why we need ‘hydroinformatics’ to consume smarter.
Have a look at these competition-winning designs for a new residential development in Eindhoven.
Grenfell Tower articles updated daily