Non-Admitted Asset Leasing Solutions – Non-admitted assets are not used in most business discussions. However, suppose you are in the insurance industry. In that case, this financial term represents a possible major problem for the firm in maintaining its current credit rating.
To simplify it, most large companies that use standard accounting practices in their reporting equipment are assets on their books. Therefore, equipment like computers, workstations, cubicles, software, lighting, copy machines, shredders, proprietary systems, and enterprise-level software applications are all shown as assets on the company balance sheet and depreciated according to preset schedules.
Insurance companies must maintain a heightened level of liquidity at all times. Their cash positions and assets can be liquidated to hedge against large losses from natural disasters where policyholders incur significant losses. State Insurance Regulators classify these as non-admitted assets as they cannot be easily converted to cash.
If the insurance company has sufficient cash on hand to meet or exceed any loss ratios, there is no problem. If there is insufficient cash on hand, Equipment Leases buys all or some of their non-admitted assets and leases them back to the carrier in a complex Sales-Leaseback transaction.
We have had our share of major weather-related disasters in the U.S. this year, such as wildfires, flooding, earthquakes, and hurricanes. During natural disasters, any loss of life or property causes increases in claims. These disasters bring with them a significant number of claims for large losses.
In each state, all insurance-related oversight is provided by that state’s appointed Insurance regulator. They are responsible for scrutinizing each insurance company in their state. This is to ensure they are in NAIC compliance. That their surplus and reserve ratios are in line. Non-compliance and the insurance company are at risk of lowering their credit rating at AM best. The top monitoring agency ranking the fiscal health of the insurer. The financial markets make investment and credit decisions based on this rating. So, it becomes critical for an insurance company to maintain the highest rating possible. To avoid a rating reduction, the insurer has some options, including equipment leasing.
NOTE: If you are not an insurance company and need information on our Sale-Leaseback product, click this link
Equipment Leases Inc. has the expertise and track record of helping insurance companies. We help them manage their non-admitted assets. We are helping them comply with their market’s surplus and reserve requirements. We underwrote a $40,000,000 sale-leaseback of a carrier’s non-admitted assets. Assets such as enterprise software programming keep their risk ratios within strict guidelines. They are leaving their quality AM Best ratings unchanged. Statutory filing line 20 EDP/Software and line 21 FFE are eligible for immediate Sale-leaseback. At Equipment Leases, we follow the basic SAPP 22 Sales and Lease Back guidelines. To provide 100% funding on qualified non-admitted assets using a proven arms-length transaction.
This process affects you if you’re a property and casualty carrier. It also affects health insurance underwriters or auto carriers. Claims of all kinds can erode Surplus reserves and lower your Risk-Based Capital Ratio. A solution for a boost in Surplus could help stabilize an agency rating from AM Best, Fitch, or Moody’s. In addition, we can assist up to $50,000,000 in non-admitted asset leasing.
Experts at Equipment Leasing Inc. can design an equipment leasing solution for your non-admitted assets before year-end. Due to the expected increase in activity in the fourth quarter, we suggest starting this process early for funding before year-end.
Equipment Leases Inc. and our insurance experts are some of the industry’s most experienced providers of large Sale-Leaseback transactions. Although our process is unique, our investor pool and expertise always bring big carriers back for second and third transactions anytime they need a cash infusion.
Suppose a carrier has a risk-based capital ratio that doesn’t meet the required minimums for their state. In that case, we are the best choice to resolve the ratio issues quickly and efficiently within what often are very narrow funding windows.
*Special note to any insurance carrier CFO – If you need a sale-leaseback of your non-admitted assets of up to $50,000,000, we should be your first choice. Our proprietary process makes us the lender of choice to meet all your needs regardless of how complex they may be.
