Warranty & Indemnity Insurance
The use of Warranty & Indemnity insurance as a substitute for conventional indemnification in M&A deals is on the rise worldwide. With our extensive background collaborating with Itochu group companies, we possess the knowledge and skills required to assist you in constructing W&I insurance policies that guard against accidental misrepresentations made during corporate M&A transaction negotiations. Our services can aid you in creating plans that allow you to transfer a substantial amount of your transactional risk to an insurance company rather than holding it on your financial statements.
What is W&I Insurance
W&I insurance provides comprehensive protection against financial loss resulting from breach of representations and warranties contained in M&A purchase agreements, including defense costs. While most policies are issued to buyers, either party can be insured and benefit from coverage.
A buyer-side policy offers distinct advantages, including the ability to claim directly against the insurer (enabling a clean exit for the seller) and indemnification for fraudulent breaches by the seller. A seller-side policy, on the other hand, protects the seller and any guarantor or warrantors from claims by the buyer, allowing them to ring-fence the risks associated with the sale and avoid claw-back of proceeds to satisfy indemnification claims. In transactions involving private equity firms, Buyer-side policies are often initiated by a PE firms who either suggests or insists that the buyer enters into the policy as the insured, facilitating a clean exit, which is often referred to as seller-side to buyer-side “flip”.
Our team of experienced professionals can help you create tailored W&I insurance policies that meet your unique requirements and mitigate the risks associated with your M&A transactions.
Benefits of W&I Insurance
Buyer Benefits
- Mitigates risk of seller covenant strength
- Certainty when investing in a new secure_asset class / geography
- Protects ongoing business relationships with management
- Extends out insufficient SPA limitation periods
- Bid differentiation in competitive auction process
- Satisfy corporate governance requirements
- Proceeds of claims can be assigned to a lender
Seller Benefits
- Clean exit / nil recourse
- Immediately realise sales proceeds
- Balance sheet protection post completion
- Prevent price chips or holdbacks
Mutual Benefits
- Removes significant obstacle
- Mitigates difficult negotiations
- Bridges gaps on uncertain exposures
- Affirmative cover for certain known risks
- Synthetic packages may be utilised
Our Expertise
In addition to standard W&I policy, we are capable in providing our clients with following lines of insurances to fill in the gaps in standard W&I policy.
