What it means
Imagine a building that is owned by one company but mortgaged to a bank. If the building burns down, both the owner and the lender have something to lose, so the insurance policy names both of them.
The ATIMA wording tells the insurer to pay each party according to its own financial interest, rather than paying everything to the first name on the policy. The clause appears in property policies, marine cargo cover, motor finance, equipment leases and trust deeds.
It is also found in contracts where a lender or landlord is added to a policy as a loss payee, which means a party entitled to receive some or all of the claim money. The phrase carries weight because it fixes how money flows after a loss, when everyone is under pressure.
In practice, the lender is usually paid first up to the outstanding balance it is owed, and the owner receives whatever remains for repairs or replacement. That order reflects the fact that the lender holds security over the asset, while the owner holds the residual value.
Where several lenders exist, the ranking of their security decides who is paid ahead of whom. The wording also has limits that people often overlook.
It does not increase the amount an insurer will pay, and it does not guarantee that every named party is covered for every kind of loss. If the policyholder breaches a policy condition, a standard clause may leave the lender exposed, whereas a stronger "mortgagee clause" can protect the lender from the owner's mistakes.
For a non-finance manager, the practical point is to read who is named on a policy and in what capacity. Lenders often require evidence of insurance with their interest noted, and a missing or badly worded clause can delay a claim or even breach a loan agreement.
A quick review by the broker before signing usually avoids both outcomes.
In practice
Real-world examples.
Example
A restaurant group finances a new kitchen with an equipment loan of $120,000. The lender is named on the property policy as loss payee ATIMA. After a fire, the insurer pays the lender what is still owed on the loan and passes the remainder to the restaurant to replace the equipment.
Example
A freight company ships machinery worth $2,000,000 under a letter of credit. The cargo policy names the issuing bank ATIMA, so any claim for loss at sea is split between the bank and the importer according to what each has paid. This keeps the bank's financing secure throughout the voyage.
Example
A landlord requires a tenant to insure a leased shop and to note the landlord as an interested party ATIMA. When storm damage occurs, the insurer pays for the structural repairs to the landlord and the damage to stock to the tenant. Each party is paid for the part of the loss that falls on its own interest.
Formula
Calculation
Share of claim for each party = lesser of (claim paid, amount owed to that party), applied in order of priority, with any balance going to the next party.
Suppose a warehouse is destroyed and the insurer agrees a claim of $900,000. The bank is owed $600,000 on the property loan and is named as loss payee ATIMA. The bank receives the lesser of $900,000 and $600,000, which is $600,000. The balance is 900,000 - 600,000 = $300,000, which goes to the owner towards rebuilding. If instead the claim were only $450,000, the bank would receive all $450,000 and the owner would receive nothing from this payment, because the bank's interest exceeds the claim.Case study
Seen in the real world.
Lakeside Fabrication is an illustrative, fictional manufacturer that bought a $400,000 press using a bank loan. The loan agreement required the press to be insured, with the bank named as loss payee ATIMA, and Lakeside's insurance broker arranged the policy accordingly.
Eighteen months later a flood destroyed the press, and the insurer agreed a claim of $350,000. At that point the bank was owed $300,000, so under the clause it received $300,000 first. Lakeside received the remaining $50,000 and funded the rest of the replacement with a new loan.
The illustrative lesson is that Lakeside never had to argue with its lender about who should be paid, because the policy had already set out the order. The finance director later added a yearly check that every loan covenant requiring insurance was matched by a correctly worded clause.
Watch out
Common mistakes.
- Assuming that naming a lender on a policy automatically gives it full protection, when a weak loss payee clause can still leave the lender exposed to the owner's breaches.
- Believing ATIMA increases the total claim, when it only decides how an agreed claim is divided.
- Forgetting to update the clause after refinancing, so the policy still names the old lender while the new one has no recorded interest.
Questions
People also ask.
What does ATIMA stand for?
It stands for "as their interests may appear" and is a standard phrase used in insurance policies and legal agreements.
Who gets paid first under the clause?
The party with the senior security interest, usually the lender, is paid up to the amount it is owed, and the remaining money goes to the next party.
Is a loss payee the same as an additional insured?
No, a loss payee is entitled to receive claim money for its financial interest, while an additional insured is covered under the policy for its own liability or loss.
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