Value Appraisal
Valuation “machinery, mechanical engineering and industrial equipment” in case of damage, for insurance conclusions and purposes for companies.
Valuation of machinery, industrial plant and equipment
Valuations are important for industrial companies and commercial enterprises. For the conclusion of insurance policies, the insurance value is required "for sure". After a claim - depending on the case - different values or valuations can be of importance.
Overview
Different valuation purposes:
Valuations of machines and industrial plants as well as operating equipment are carried out, for example, for the following purposes:
- Insurance valuation for the conclusion of an insurance policy,
- Insurance valuation in the event of a claim,
- Determination of market value for financing,
- Determination of market value for mortgages,
- Determination of market value for purchase and sale
Determine insurance values
The insured value is critical in answering the question, “Is there overinsurance or underinsurance?”
If the insured value determined in the event of a loss is higher than the agreed sum insured, underinsurance exists. This influences the regulation by the insurer.
Conclusion of a fire insurance or a machine breakage insurance
The insured value must usually be determined currently for underwriting purposes if fire insurance or machinery breakdown insurance is to be taken out. This also applies to the german insurance conditions for stationary machines (AMG) and mobile machines (ABMG).
Replacement value and current value must be determined in the event of a claim.
It is important that the sum insured agreed with the insurer also corresponds to the insured value. If the agreed sum insured is lower than the insured value, there is underinsurance.
Determination of the insured value in the event of a claim
In the event of a loss occurring and in particular in the case of major losses, the insured value determined on behalf of insurers. This can lead to unpleasant surprises in the event of a major loss if the Insured value is higher than the agreed sum insured. Finally, this concerns the level of regulation.
It is important that the sum insured agreed with the insurer also corresponds to the insured value. If the agreed sum insured is lower than the insured value, there is underinsurance.
Recommendation:
- Determination of the new values and, if applicable, the fair values;
- Determination of the insured values to derive the applicable sum insured;
- regular review and adjustment of the values.
The regular review makes sense because you can
- in the event of a claim, the underinsurance and
- at the same time too high premium with too high sum insured
can avoid. Particularly in the case of large companies, insurance premiums are also in the 6-digit range. Therefore, regular testing with adjustment of the values is “worthwhile”.
Determination of fair values
In order to remain liquid, mortgages, pledges, transfers of ownership by way of security are more common than uncommon in industrial companies as well as commercial enterprises. Banks also require a market value appraisal for lending purposes , as they do for business relocations.
Financing and mortgaging
Banks and lenders require appropriate collateral for the loan.
The fair values of machinery and equipment are therefore significant when negotiating with banks and lenders.
However, banks must require appropriate insurance cover as collateral (EU No. 575/2013).This is why the replacement value or insurance value is reported inaddition to the fair value.
Relocation of operations or business equipment and sale of the company
The fair values of machinery and equipment are significant when operations or equipment are relocated. This also applies to the transfer of values to subsidiaries.
When relocating, the relocation costs must also be determined.
In order to avoid unnecessary disputes with tax authorities due to the transfer of fixed assets from one company to a subsidiary, it is advisable to obtain an external fair value opinion when selling.
Recommendation:
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annual review and adjustment;
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Transmission of the “new” values to the bank or lender.