RVI is a simple concept and one anyone who’s leased a car should be familiar with. In short, it’s insurance against the future value of something falling below a certain level.
Sound good? You bet. Imagine if all those sub-prime mortgages had been backed by RVI policies. (But then maybe the insurance industry wouldn’t have been that foolish…?)
Now, RVI has never been all that big in shipping. Yours truly drafted a RVI policy for a Boeing 747 sale and leaseback deal once, but never for a ship.
Ship valuations, you see, have always suffered from such volatility that forecasting their residual value at the end of a loan has been as hard as predicting the end of the recession.
BUT, the recession itself may well have given shipping RVI its big chance. Values are low. Residual values therefore?
Well, the theory goes that they’re not going to get ‘too much’ lower. Right? So, the eggheads at insurers (no, the actuaries, not the underwriters) feel more comfortable assessing the risk of insuring future values.
With bankers still wondering how it all went so wrong and the shipping press full of stories of impending repossessions, RVI might give some industry players the confidence to enter the game again.
To learn more about RVI, give us a call and we’ll put you in touch with some friends of ours who dance to the RVI tune for a living.