Ensure complete peace of mind long after your deal is closed, with ironclad W&I guarantees, crafted by a team of Mergers and Acquisitions specialists.
Protecting your business from the first conversation to the final signature (and beyond)
Transactional Risk Insurance helps mitigate risks for both buyers and sellers involved in mergers and acquisitions, enhancing the attractiveness of the deal and facilitating smoother negotiations between parties. Typically, Transactional Risk Insurance encompasses Warranty and Indemnity Insurance (W&I), Tax Liability Insurance and Contingent and Litigation Risk Insurance, as well as Insurance Due Diligence.
W&I for buyers
Using our extensive experience across a range of sectors and geographies, the Lockton team assists buyers in selecting the right insurer for the transaction and structuring bespoke, tailored W&I policies that maximise coverage. Should there be a claim, our M&A claims specialists will assist buyers throughout the claims process.
W&I for sellers
The Lockton team advises sellers on using W&I Insurance to ensure as clean an exit as possible from transactions. We can help sellers to provide an insurable warranty suite to buyers and our tax and contingent specialists can advise on pre-emptively insuring any identified risks, thus minimising gaps in coverage and easing commercial negotiations.
Our Industry leading offering:
Deep expertise
Our global broking team comprises ex-corporate lawyers and underwriters who have decades of experience in the transactional risks market.
Creativity
Looking beyond off-the-shelf coverage, we use our expertise to structure tailored insurance solutions to ensure that transactions are executed with precision.
Back to back cover
We will review the transaction documents to ensure as clean a coverage position as possible, both through the use of W&I policies and standalone Tax and Contingent and Litigation Risk Insurance.
A holistic offering
Our industry overview allows us to offer a broader perspective, helping clients understand both ongoing operational risks and the full spectrum of your corporate risk.
“The Lockton team are my first port of call when a transaction requires a W&I element. They provide timely and efficient solutions and display a deep, entrenched knowledge of the market. I would have no hesitation in recommending Lockton to my clients"
Warranty and Indemnity Insurance FAQs
What is Transactional Risk Insurance?
Transactional Risk Insurance works to protect both buyers and sellers involved in mergers and acquisitions (M&As). It allows organisations to transfer many of their risks to an insurance provider, and away from their balance sheet. Typically, Transactional Risk Insurance encompasses Warranty and Indemnity Insurance (W&I), Tax Liability Insurance, Contingent Risk Insurance, as well as Insurance Due Diligence and risk solutions to protect a business throughout the M&A transactions process.
What is W&I Insurance
Warranty and Indemnity Insurance (W&I) covers the unknown risks in an M&A deal – protecting buyers and sellers against financial losses.
What does W&I Insurance cover?
A W&I policy will cover the insured for unknown risks, protecting it from any loss suffered as a result of:
breach of warranties; or
a claim under the tax indemnity.
What does W&I Insurance not cover?
A W&I policy will typically not cover the insured for losses arising from:
Known risks / issues known to the buyer, including matters covered by specific indemnities
Disclosed matters – including UK/Europe general disclosure (data room, due diligence reports, specific disclosures) and US disclosure (specific disclosure schedules)
Fraud by the buyer
Forward-looking statements
Purchase price adjustments (e.g. leakage indemnities or completion accounts mechanisms)
Anti-bribery and corruption (depending on jurisdiction)
Professional negligence/errors and omissions
Defined benefit pension underfunding
Condition of assets (in the absence of detailed technical due diligence)
High risk areas where other lines of insurance would be more appropriate (e.g. environmental and cyber)
Secondary tax liabilities
Transfer pricing
Valuation of tax assets.
How is the risk/policy on a W&I premium calculated?
The risk premium on a transaction is normally calculated at 0.6% to 2% of policy limit dependant on size, jurisdiction and sector of the transaction.
How long is a typical policy period for?
A standard policy period in the insurance market can last between two and three years for general warranties, and up to seven years for fundamental and tax warranties.
How often are W&I Insurance claims paid out?
Claims are always paid out if they meet the conditions for constituting a valid claim. Among other things the following are preliminary conditions that must be met to constitute a valid claim:
Is the claim in line with the W&I Policy terms? i.e. the notification ought to be made within the policy period
Confirm that the claim does not fall within any possible general exclusions or specific exclusions that had been agreed upon
Make sure that the breach was not disclosed against in either the disclosure letter, the data room or the seller / buyer DD reports.
However, many policies are subject to arbitration clauses and are subject to confidential terms and so results are not often made public.
What are the most common types of claims notifications?
In our experience, the most common claims we receive in Europe are tax, financial statements, litigation, permits, licenses, consents, material contracts and compliance with laws.
We particularly see tax claims in the technology, media and telecommunications (TMT) sectors, where fast growing businesses have failed to keep up with the tax regimes.
Let’s talk about your next deal...
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