Lenders in Leveraged Leasing Transactions: Insurance Considerations


This practice note discusses insurance issues facing lenders in leveraged leasing transactions and the steps that a lender should take to protect its interests. A leveraged lease transaction is one where a lessor leases an asset (such as real estate, automobiles, or equipment) to a lessee. In leveraged leasing transactions, the lender generally requires the lessee to obtain adequate insurance as a condition precedent to the closing of the applicable loan to protect the value of the loaned asset as well as its stream of income. Lender's counsel need to understand the insurance issues in leveraged leasing transactions to advise and protect the lender's interest.