The term Non admitted assets is not used in most business discussions. However, suppose you are in the insurance industry. In that case, you know this financial term represents a possible major problem for the firm in maintaining its current credit rating.
To make it simple, 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 steps in to buy 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’s 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 is at risk of a lowering of 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. Helping them to comply with the surplus and reserve requirements in their market. We underwrote a $40,000,000 sale-leaseback of a carrier’s non-admitted assets. Assets such as enterprise software programming keeping their risk ratios within strict guidelines. 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 underwriter, or auto carrier. 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 most experienced providers of large Sale-Leaseback transactions in the industry. 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 up to $50,000,000, we should be your first choice. Our proprietary process makes us the lender of choice to meet all of your needs regardless of how complex they may be.