Warranty and Indemnity Insurance for M&A and private equity transactions allows either the buyer or seller to purchase cover protecting them from infractions in the SPA and corresponding documentation.

BUY SIDE

A Buy Side policy is written on a first-party basis and allows the Insured to seek indemnification directly from the insurer(s) in the event of inaccuracies of the warranties and representations in the SPA. It can also provide the following benefits to the buyer:

• Enhanced Bargaining Position, a W&I policy allows the buyer to enhance its bid by reducing the indemnity ceiling and escrow
• Protection against seller fraud
• Avoid Legal Action Against Management, in the event that the management of an acquired entity survives the acquisition, W&I insurance provides an alternative to pursuing legal action against existing management.
• Supplementary level of due diligence achieved through the underwriting process, which is undertaken b experienced professionals (Lawyers, Accountants, etc)
• Resolve Conflict, if an impasse is reached over desired escrow amount/indemnity ceiling
• Financial Security, replaces the seller with an S&P rated insurer, assures that the indemnity will be paid.
• Single Jurisdiction, where a buyer is dealing with multiple sellers in differing jurisdictions and has concerns on being able to recover its losses, they are able to replace this with insurers in a single jurisdiction.

SELL SIDE

A Sell side policy is written as third-party coverage. This means that indemnification is provided by the insurer to the Seller for defence costs and loss resulting from claims made by the buyer for inaccuracies in the warranties and representations in the SPA. It can also provide the following benefits to the Seller;

• A Clean Exit, a policy can be structured so that it takes the place of an escrow account or is a supplement to the escrow account.
• Enables the Seller to distribute the proceeds of a transaction back to its shareholders quicker and free up capital for reinvestment
• Supplementary level of due diligence achieved through the underwriting process, which is undertaken b experienced professionals (Lawyers, Accountants, etc)
• Reduce contingent legal liabilities that may arise post transaction