Warranty and Indemnity Insurance

Representation and warranty errors made by the seller or the target company in mergers, acquisitions or divestiture transactions presents a significant potential exposure that can result in large and costly liabilities.

Warranties and Indemnities Insurance is a transaction specific insurance solution designed to cover financial losses arising from such breaches. Supplementing the due diligence process, W&I Insurance serves as an additional and alternative risk management tool by transferring the risk of losses to a third party, thereby reducing or removing exposure to any breaches of the warranties provided.

W&I Insurance can also be used strategically by either party in a transaction to achieve an optimal deal outcome.

A buyer-side policy allows the buyer to recover losses from inaccuracies in the warranties and indemnities directly from the Insurer without first having to pursue recovery from the seller. A seller-side policy reimburses the seller for losses from warranty claims by the buyer, protecting the seller from having to return a portion of the purchase price.

Bespoke policy tailored to meet the specific needs of each transaction.

• Back-to-back with the recourse and risk allocation agreed between the buyer and the seller in the acquisition agreement;
• Mirror the minimum claim provisions (de minimis and retention thresholds) and other limitation language in the acquisition agreement;
• Match the warranty survival period under the acquisition agreement (including any extended period for tax), but the policy term may be extended if required by the client;
• Cover first and third party claims and associated defence costs. Cover on a buyer policy will also respond to fraud by the seller.