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November 30, 2020

Insurance coverage for IP backed loans

The market for IP insurance coverage is heating up, as a recent article in Business Insurance reports.

As more companies use intellectual property as collateral for loans, an
insurance market designed to help facilitate the deals is emerging. Sometimes using insurance-linked securities structures, the insurance coverage kicks in if a borrower defaults on a loan and the value of the intellectual property used to guarantee the loan doesn’t cover the
lost value. Insurance players include Aon, Marsh and PIUS.

Insurance-backed valuations of IP assets allow borrowers to obtain debt financing with much less risk involved for the lenders. Less risk translates to a lower interest rate and larger loan amounts.

As for the valuation, half of the more than 130 people on the intellectual property insurance team at Aon are building a natural language processing system to assess and value intellectual property assets. Intellectual property can be “mapped” to see where it would fit in its market to help understand its value once in use.

The evaluation of the worth of the intellectual property takes place within the context of what it would be worth if it had to be monetized, which doesn’t necessarily mean sold. Monetization can take place in one of a number of ways, including licensing and royalties.

To read the full article, please click on this link.

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