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We work for buyers and sellers in corporate transactions, as well as for the firms that advise them. Our job is to make sure the parties in a transaction get the insurance coverage they need, first to make their deal happen, then to protect their interests in the future.
— CAPITAL
Transaction Liability
Our Role Is To Make Your Deal Happen Now – And To Protect Your Interests In The Future
Warranty and indemnity insurance benefits both sellers and buyers in corporate transactions. A policy indemnifies a party for financial losses that could arise out of a breach of warranty or indemnity in the purchase agreement. Sellers use it to limit their ongoing liabilities and prevent sale proceeds being held up in escrow, allowing them to exit deals cleanly. Buyers use it to make their bids more attractive to sellers and to protect the value of their investment once deals are done.
We work for buyers and sellers in corporate transactions, as well as for the firms that advise them. Our job is to make sure the parties in a transaction get the insurance coverage they need, first to make their deal happen and then to protect their interests.
We can put together back-to-back cover for warranty liabilities given in the purchase agreement transferring the risks to the insurer. The insurer will either cover the buyer (a buyer-side policy) or agree to indemnify the seller (a seller-side policy). Our team also structure insurance solutions to cover known risks identified in due diligence including tax, legal and pension contingencies.
Our Products and Services
We will use our experience, influence and relationships with insurers to get you the best possible coverage. We will also:
Scrutinise your deal to understand it inside out and help you get a better understanding of the risks you face
Help you structure your agreement so it gets over the finish line and suggest changes to the structure or the wording to make it more acceptable
Identify difficult risks and help you access the global markets needed to cover your risks
Look past the deal itself to help you understand your on-going operational risks and consider the full spectrum of your corporate risk
Help you cover known liabilities and put contingent risk insurance in place
Our Services
W&I insurance
Tax insurance
Contingent insurance
Due diligence
We work alongside you to make sure your deal happens the way you want it to.
Country Key Contacts
Terence Montgomery
Head of M&A, Transaction Liability Asia Pacific
terence.montgomery@lockton.com
Giovanni Colistra
Vice President, Transaction Liability Asia Pacific
giovanni.colistra@lockton.com
General Enquires
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W&I Insurance facilitates deals
A buy-side W&I policy can enhance or replace seller indemnification under the purchase agreement.Indemnification Cap or Policy Limit
Typical W&I policy coverage:
10%-20% of purchase price (but may be able to insure up to 100% - the buyer can arrange this direct with the insurer without seller involvement)
Can top-up limit for fundamentals only (again – the buyer can arrange this direct with the insurer without seller involvement)
Seller can get nil recourse (ex-fraud) and nil escrow.
Typical SPA indemnification coverage:
5-10%% of purchase price for general warranties.
Seller often required to provide100% cap for fundamental warranties.
Loss Definition
Typical W&I policy coverage:
Inclusion of consequential damages, DIV, multiplied damages and similar damages is heavily negotiated.
Typical SPA indemnification coverage:
Most insurers are willing to follow silence as long as the purchase agreement does not explicitly grant/exclude such damages.
Materiality Scrape
Typical W&I policy coverage:
Materiality scrape not that common in the purchase agreement – exception rather than the norm.
Typical SPA indemnification coverage:
When the purchase agreement does have a materiality scrape, most insurers are willing to follow this.
Recourse for Breaches
Typical W&I policy coverage:
Buyer's recourse is to proceed against the escrow, which may include proceeds owed to management/rollover sellers.
Typical SPA indemnification coverage:
After retention is satisfied, the policy will respond to all covered matters. Buyer has right (but not obligation) to proceed against the seller to satisfy part of the retention, subject to the terms of the purchase agreement. In practice the buyer claims directly against the insurer and not the seller.