Risk Insurance Policy Discussion
With a Principle/Interest rider
All Risk Insurance is an insurance policy that has been a tool for businesses for many years. It attempts to group together coverages that mitigates many of the usual business risks that are prevalent today. Most, if not all companies, utilize some parts of the all risk insurance, but our group has added a new rider that helps mitigate the lenders risk by guaranteeing principal and interest payments (including bankruptcy risks).
The Principle/Interest rider starts with the lenders term sheet and customizes the policy to cover risks according to total capital needed, capital disbursements, and escrows required. The policy can stay in effect from construction thru the loan period.
The All-Risk policy starts with an escrow account with 12-months of principle/interest payments (additional capital from the lender), held by the lender, and is activated if there isn’t sufficient capital to make a loan payment. Once the money is taken from the escrow account, the insurance company is notified and has 5-payments/months to rectify the problem. If the escrow account drops to half or 6- months of payments, the insurance company must bring the escrow account back to 12 months of payments. If the loss is considered catastrophic, the insurance company must pay the lender the remaining principle on the loan and any accrued interest, even in the case of bankruptcy. The cost of this insurance is determined during underwriting and has been shown to be very competitive.
This is just a high-level summary of the All-Risk Insurance policy with a principal and interest guarantee rider. Before making any decisions, it is important to talk to our team for further information and more details on how this product can help your project.
Advantages/Benefits:
- Long term amortization (20-years) on completed vessel.
- Reduced cash payment required at start-up: (_%)
- Blended rate, including construction, closing fees and term: (___%)
- No Residual Value Insurance required for FMV residual: full payout
- EBO: at the end of eight-years, monthly EBO after that with no pre-payment penalties
- Rate reset every five-years
* Step down payment at end of year-five
- No Bond or LC required during construction
- Credit enhances balance sheet “lower risk = higher yield”
Insurance Summary:
Lender Risk Insurance – “A Rated Insurer”
With a Principle/Interest rider
All Risk Insurance is an insurance policy that has been a tool for businesses for many years. It attempts to group together coverages that mitigates many of the usual business risks that are prevalent today. Most, if not all companies, utilize some parts of the all risk insurance, but our group has added a new rider that helps mitigate the lenders risk by guaranteeing principal and interest payments (including bankruptcy risks).
The Principle/Interest rider starts with the lenders term sheet and customizes the policy to cover risks according to total capital needed, capital disbursements, and escrows required. The policy can stay in effect from construction thru the loan period.
The All-Risk policy starts with an escrow account with 12-months of principle/interest payments (additional capital from the lender), held by the lender, and is activated if there isn’t sufficient capital to make a loan payment. Once the money is taken from the escrow account, the insurance company is notified and has 5-payments/months to rectify the problem. If the escrow account drops to half or 6- months of payments, the insurance company must bring the escrow account back to 12 months of payments. If the loss is considered catastrophic, the insurance company must pay the lender the remaining principle on the loan and any accrued interest, even in the case of bankruptcy. The cost of this insurance is determined during underwriting and has been shown to be very competitive.
This is just a high-level summary of the All-Risk Insurance policy with a principal and interest guarantee rider. Before making any decisions, it is important to talk to our team for further information and more details on how this product can help your project.
Advantages/Benefits:
- Long term amortization (20-years) on completed vessel.
- Reduced cash payment required at start-up: (_%)
- Blended rate, including construction, closing fees and term: (___%)
- No Residual Value Insurance required for FMV residual: full payout
- EBO: at the end of eight-years, monthly EBO after that with no pre-payment penalties
- Rate reset every five-years
* Step down payment at end of year-five
- No Bond or LC required during construction
- Credit enhances balance sheet “lower risk = higher yield”
Insurance Summary:
Lender Risk Insurance – “A Rated Insurer”
- All Risk Insurance plus Principle and Interest Rider
- Insurance Policy tailored to match Lender loan documents
- The cost of insurance is determined during the underwriting process
- Lender accrues 6-12 months interest payments
- Insurer notified if funds are used from escrow.
- Insurer has 5-months to rectify the problem
- After 6-months payment deficiency the insurer will bring escrow back to 6-12 months payments
- If there is a catastrophic loss, Insurer will pay Lender the remaining principal and interest.
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