Warranty & Indemnity
Any deal is likely to have certain elements where you’re uncertain or uncomfortable. Warranties and Indemnity (W&I) insurance is a powerful tool to streamline negotiations between the parties, offering financial protection for unknown risks that lead to warranty breaches.
W&I can allow the seller to limit its liability to a low level, while also giving the buyers their desired protection. It covers breaching warranties or a claim under the tax covenant set out in the underlying acquisition agreement.
Always bespoke
Every deal is different, so the insurance contracts must be bespoke; tailored to match the deal covenants precisely. We handcraft solutions to help you get your deals over the line, without the sleepless nights.
The W&I specialists who make up our team have backgrounds in corporate and tax law, investment banking and insurance.
Who is W&I insurance for?
The buyer or seller. The seller will often introduce insurance to the deal but, in 9 out of 10 deals, the buyer is the policyholder. A buyer-side policy affords the buyer more control and comfort; they can claim directly from the insurer, with no need to involve the seller. The insurer will waive subrogation rights against the seller (barring seller fraud, of course).
W&I can also be used in place of escrow funds so that proceeds are distributed to investors immediately rather than tied up.
Key exclusions in W&I policy
The following are not covered under the terms of a standard W&I.
- Known, identified risks
- Transfer pricing
- Secondary tax liabilities
- Pensions underfunding
If you would like to discuss scenarios that include the above, please get in touch and speak to a specialist.
Premiums
Typically 0.75-1.3% of the policy limit for real estate transactions and 1-2% for operational businesses - depends on factors including the jurisdiction of the acquisition agreement, nature, and location of the target's operations and policy parameters.
Timeframe
We can go from an initial discussion to having a tailor-made policy in place for you within 17 days.
Policy periods typically match or, in the case of a buyer-side policy, extend the time limitations set out in the acquisition agreement. The policy period is generally 18-36 months for general warranties and seven years for title, capacity and tax.
Why cyber insurance?
No matter how robust your IT security protocols are, they cannot prevent human error, and all it takes is for one person to make one mistake.
With businesses increasingly relying on technology to drive core objectives, the risk of losing money and data, or technology being denied or failing due to accidental or malicious interference has never been greater. Business leaders without a well-thought-out strategy around cyber protection are effectively gambling with all their funds to develop their business. Or depending on your cash reserves, your very survival.