Have any of you worked with a borrower that self insures his collateral/property? I'm wondering what to look for here

Significant liquid assets.

I can't say that I have but if the occasion ever arose I would insist getting our attorneys involved to draft an agreement to make sure the bank is protected just in case a part of our collateral was destroyed and the "self insurer" decided they didn't want to rebuild that particular piece of collateral.

If flood insurance is involved then there is no way under any circumstance you can accept a self insured situation, unless you are dealing with state owned property and they (the state) have an adequate self-insured program in place.

"Self-insured" basically means they have no insurance. There is no such thing. If a loss is involved, they would have to pay off the loan from other liquid assets.

As Dan said, - for flood insurance - no way. For other hazard insurance - I wouldn't blink an eye if my applicant was Bill Gates or Warren Buffett. I would be a little skeptical of everyone else.

I have seen this accepted with a letter of credit in place.

I will go with attorney review. I will let you know what I find out. The building is leased to a major pharmacy chain that says it is self-insured. Thanks everyone.

If the building is leased, what does the tenant have to do with anything???

Likely a triple net lease with tenant responsible for everything. There should be credit analysis of the tenant.