Many years ago, yours truly had a proper job as a lawyer (some would dispute of course that it is a proper job).
One of the last projects I worked on in private practice was drafting a Residual Value Insurance policy to facilitate the refinancing of a Boeing 747. For those who are unfamiliar with RVI, it provides an insurance policy to protect both asset owners and ship financiers against the vessel's value at the end of the loan being less than the final 'balloon' payment required to clear the debt.
RVI is relatively common in industries where asset values are considered more stable than they are in shipping. Anyone who has been anywhere salt water in the last ten years knows that maritime asset values are, to say the least, a wee bit volatile.
So, it was a surprise to read in Tradewinds recently that a new shipping Residual Value Insurance company is soon to be launched. Theta Insurance, founded by David Edwards, will apparently be joining the market in due course to help the shipping industry get back on its financing feet! It's a good concept but, we think, a bit of a brave idea. Is it one that really could only work in a market such as today's where asset values are already low and therefore the loan to value ratio and necessary residual value is also relatively low?
We would be interested to hear your views and will be running a discussion on the subject in our LinkedIn group, Shipping Jobs.