Residual Value Insurance

In the past few years the demand for Residual Value Insurance has been exponential. The reduction in traditional funding has led to a huge demand for alternative solutions to debt financing for big ticket assets and has fueled the use of operating leases, finance leases and the need for investment from private equity partners. These structures often require a level of RVI from lessors unwilling or unable to take asset risk and from investors wishing to limit their downside.

Contrary to the demand the underwriting market for RVI is limited, with only a handful of RV providers prepared to offer terms on a highly selective basis. In 2012 the market started to show signs of growth with talk of new RVI insurers entering the fray and the emergence of a reinsurance market. This “hype” has continued into 2013 and additional capacity will develop in 2013. We have access to reliable capacity with rated international insurers.

In terms of underwriting, each RV provider has preferences for asset types and levels of risk. For example, some insurers will only write RVI on Boeing and Airbus aircraft, whereas others will consider most aircraft types including helicopters, regional jets, turbo props etc. Some will underwrite RVI on commercial real estate whilst it is on the exclusion list for other insurers. A bank may be comfortable providing RVGs on corporate jets whereas they would be on the declinature list for certain RVI insurers.

As values of commercial vessels have declined, a market has developed for most types of shipping. Part of our role is to match the risk appetite of the RV underwriters to the requirements of our clients.

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