The importance of the equity valuation for insurance purposes

By: Jabor Descio Sobrinho, Engeval’s CEO – Engenharia de Avaliações

In the past, the importance of equity valuation for insurance purposes, it was common for companies to establish the insured value of their assets based on accounting records, which led to the adoption of distorted values at risk and, of course, causing losses from overestimated or underestimated premiums. Thus, the correct hiring of a policy must be based on the values at risk established through rigorous equity valuation. Just as important as electing a good broker and a good insurer is the choice of the company that will evaluate your equity and establish the actual values at risk.

The correct determination of values at risk should focus on the real cost of replacement/reproduction of the assets to be insured. We remind you that the equity valuation is supported in engineering techniques and in the market reality of each asset class.

The assessment final outcome is a report in which all insurable assets are detailed and allocated by risk area. The report presents the following values for each of the assets: new replacement / reproduction cost, re-issue cost (new reproduction cost less physical depreciation) and maximum value for insurance – equal to the new value, when the technical depreciation is less than 50% or twice the depreciated value, when the depreciation is greater than 50%.
The existence of a detailed evaluation report, in addition to allowing the real amounts at risk to be established, contributes to the regulation of claims, both in terms of speeding up and in order to resolve any doubts that normally arise.