Composite insured and loss payee status in favor of the banks were historically reserved for transactions of significant size but these are now seemingly demanded for much smaller loan deals. the insurance requirements set out in loan agreements are constantly evolving. in this bulletin we discuss the common issues faced by lenders and the insurance industry in meeting these requirements.
It is good to see banks’ lending again – we have seen a significant increase in financing/refinancing activity in the UK in the past eighteen months.
The problem is that it can take weeks, if not months, of toing and froing between lenders, solicitors, brokers and insurers, all negotiating the intricacies of that one final insurance clause – maybe even a single word or phrase holding up the whole deal! Far too much time is spent trying to accommodate ever evolving lending requirements that vary from one deal to the next.
Unlike some European countries, there are no statutory provisions to ensure that a lenders interest is automatically noted. What is needed therefore is a clear protocol, agreed by banks and insurers, upon which everyone can rely.
The Loan Market Association (LMA), in an endeavor to ensure that lenders are afforded adequate protection under a borrower’s insurance policy, goes some way to creating standardized requirements - requirements however that have never been sanctioned or totally understood by the insurance industry.
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For further information, please contact Ben Thompson, Partner, Real Estate on +44 (0)207 528 4027