Assured Value Insurance

Assured Value Insurance covers the shortfall when collateral real estate must be sold because a real estate project finance (PF) loan or similar financing is not repaid, and the actual sale price falls below the Assured Value agreed at the inception of the policy. By securing the future disposal value of the collateral, it reduces the lender's risk of principal loss.

-Growing risk of collateral value decline amid real estate market downturns and rising unsold inventory

-Collateral assets being sold below market value in public sales or court auctions

-Better PF loan approval and financing terms through enhanced collateral value

-Policyholder: Real estate developers (including SPCs)

-Insured: Financial institutions providing the PF loan (lenders)

-Insured property: Real estate under construction or completed, such as officetels, neighborhood retail facilities, offices, multi-unit housing and knowledge industry centers (acceptance of each property is subject to the insurer's underwriting)

If, after completion of the building, the loan principal is not repaid at maturity or the loan is accelerated due to a payment default, and the insured disposes of the collateral, the policy pays the amount by which the actual sale price falls short of the Assured Value, up to the limit of indemnity. The sale must follow a procedure approved by the insurer, such as a public sale, court auction or private sale.

-Claim payment = (Assured Value − Actual Sale Price − Deductible) × (1 − Co-insurance Ratio)

-Example: Assured Value KRW 10 billion, actual sale price KRW 7 billion, no deductible, co-insurance ratio 10%
→ (KRW 10 bn − KRW 7 bn) × 90% = KRW 2.7 billion paid

-Losses other than loan principal, such as late or default interest, and costs related to the disposal

-Losses arising from events that occur before completion of the building

-Loss of value caused by physical damage such as fire or collapse, or by design or construction defects

-Losses from a sale made without the insurer's prior written consent

-Losses due to third parties' priority rights, such as liens, mortgages or taxes

-Losses caused by the policyholder's fraud, misrepresentation or misappropriation of sale proceeds

-Main line: +82-10-2360-5482