How does GPU residual value insurance protect lenders?

The policy guarantees a minimum resale price for GPU collateral. If the borrower defaults and you liquidate the hardware, the insurer pays the difference if the sale price falls below the guaranteed floor. You can be named as loss payee so proceeds flow directly to you.

Can the policy be assigned to a lender?

Yes. The policy can name a lender as loss payee or additional insured. This is standard practice in equipment financing and mirrors how aircraft RVI policies have been structured for decades.

How does GPU insurance affect advance rates?

Without insurance, lenders typically have to discount GPU residual value. With a guaranteed floor, you can underwrite against the insured value rather than a speculative estimate, supporting higher advance rates, and more flexible structures.

Who pays the insurance premium?

The borrower pays the premium upfront, typically included in the project capital budget. It does not add to the lender's cost basis. Premium is approximately 1% of the hardware list price.

GPU infrastructure financing and investment for lenders and investors

GPU Residual Value Insurance for Lenders & Investors

Updated March 2026

The Collateral Problem

GPUs make up 60% or more of data center capital expenditure. Lenders financing GPU clusters face a specific problem: nobody can reliably predict what an H100 or B200 will be worth in 3 years.

NVIDIA releases new architectures roughly every 2 years. Each generation can compress resale values of the previous one within 12-18 months.

This uncertainty forces lenders to either discount GPU collateral heavily, shorten loan terms, or avoid the asset class entirely. Viable projects stall because the collateral math doesn't work.

How Insurance Helps

GPU residual value insurance guarantees a minimum resale price for the GPU fleet. If the hardware sells below the guaranteed floor at any point during the policy term, the insurer pays the difference. Disposal is not limited to end of term.

A known collateral floor. Underwrite against the guaranteed value instead of a speculative estimate.
Higher advance rates. An insured floor lets you lend more against the same hardware.
More flexible structuring. Balloon payments and tech refresh cycles become feasible when residual value is backstopped.
Default recovery. If the borrower defaults, the policy can be assigned to you as loss payee. When you liquidate the collateral, the guaranteed floor still applies, recovering more value from the sale.
A proven structure. Aircraft, vehicle, and heavy equipment lenders have used the same approach for decades.

Without insurance, you might assume a 30% residual value. With a 20% guaranteed floor, the downside is bounded.

Coverage is backed by top-rated reinsurance. The borrower pays the premium upfront.

What Happens if the Borrower Defaults

The policy can name you as loss payee or additional insured. If the borrower defaults and you need to liquidate the GPU collateral, the guaranteed floor still applies. You sell the hardware on the open market, and if the sale price falls below the guaranteed minimum for that policy year, the insurer pays the gap directly to you.

This changes the recovery math on distressed GPU-backed loans. Without insurance, liquidating a defaulted GPU fleet means accepting whatever the secondary market offers, which could be well below the outstanding balance if a new NVIDIA architecture recently launched. With insurance, your recovery has a floor.

Disposal can be triggered at any point during the policy term. If a borrower defaults in year 1 of a 3-year loan, you liquidate at the year-1 guaranteed floor, which is typically higher than the year-3 floor. Early default does not reduce your protection.

How the Policy Fits Into Loan Documentation

Loss payee designation. The policy names you as loss payee, so insurance proceeds flow to you if the collateral sells below the floor.
Collateral valuation. The guaranteed floor can serve as the baseline for collateral coverage ratios and covenant testing.
Balloon payment sizing. Structure end-of-term payments against the guaranteed residual value, reducing monthly amortization for the borrower.
Reinsurance backing. Coverage is backed by top-rated reinsurers. The counterparty credit quality is comparable to the reinsurance structures used in aircraft EETCs.

The premium is paid upfront by the borrower, typically included in the project capital budget. It does not add to your cost basis.

Questions

How does GPU residual value insurance protect lenders?: The policy guarantees a minimum resale price for GPU collateral. If the borrower defaults and you liquidate the hardware, the insurer pays the difference if the sale price falls below the guaranteed floor. You can be named as loss payee so proceeds flow directly to you.
Can the policy be assigned to a lender?: Yes. The policy can name a lender as loss payee or additional insured. This is standard practice in equipment financing and mirrors how aircraft RVI policies have been structured for decades.
How does GPU insurance affect advance rates?: Without insurance, lenders typically have to discount GPU residual value. With a guaranteed floor, you can underwrite against the insured value rather than a speculative estimate, supporting higher advance rates, and more flexible structures.
Who pays the insurance premium?: The borrower pays the premium upfront, typically included in the project capital budget. It does not add to the lender's cost basis. Premium is approximately 1% of the hardware list price.

GPU Residual Value Insurance — how the policy works, what it covers, and industry precedent