Warranty & Indemnity (W&I) Insurance
What it is
W&I insurance is designed to step in when things don’t go to plan after a deal completes. It is a one-off non-renewable claims-made policy to covers losses that a buyer or seller suffers following a breach of warranty or indemnity given under the acquisition agreement.
More than a risk transfer tool, W&I insurance is a powerful deal enabler. It helps remove uncertainty and smooths the path to getting the deal done.
Clean exit for sellers.
Eliminates the need for escrow.
Bridging gaps between sellers’ financial covenants and buyers’ protection requirements
Can top-up indemnity limits and extend protection periods
First party claims against the policy – no need to pursue the seller
Auctions differentiation
Premiums
W&I insurance with Acquinex is written for a one off, up front premium for the lifetime of the policy, calculated as a percentage of the insured limit (the “rate on line”), typically between 0.4% and 2.0% depending on the type of deal and level of risk. Unlike many insurers, we do not apply minimum premiums. We believe deals of all sizes should be able to access cost effective W&I cover.
Appetite
Acquinex supports transactions across most industries, jurisdictions and governing laws across UK and Europe.
Speak to a specialist
Henry Pearson
Global Head of W&I
Region & Business Heads
Jamie Atherton
Head of UK
Antonio Jesús Sánchez
Head of Southern Europe
DACH
Dr Marco Niehaus, LL.M. (Cantab)
Managing Director | Head of DACH
Johannes Wohlmuth
Head of Germany
Nordics
Mikael Karlsson
Co-Head of Nordics
Gustav Sannegård
Co-Head of Nordics
CEE
Michał Fąderski
Head of CEE
France & Benelux
Francois Piquet
Head of France and Benelux
FAQs
No. Whilst obtaining W&I insurance may make the negotiation easier, given that:
(i) the seller will often settle on a higher liability cap under the acquisition agreement than they may have otherwise given that they are now protected; or reversely
(ii) that the buyer will settle on a reduced seller liability cap under the acquisition agreement given that they can now recover from the insurance, we expect the parties to conduct themselves as they would had if there was no insurance.
Therefore, it is expected of the parties to negotiate the warranties at an arms’ length basis and for the seller to conduct a thorough disclosure process.
No, the insured under a policy still needs to carry out adequate due diligence as if a policy as not being purchased.
No, a W&I policy is known as a first party policy, meaning that the insured has a right to bring a claim against an insurer for a covered breach of warranty.
If the seller does have liability under the acquisition agreement, the buyer can choose whether to pursue the seller or make a claim against the insurance policy.
Sellers are only able to insure up to that which they are liable for under the acquisition agreement.
Conversely, buyers can choose the level of cover they require depending on their appetite for risk, up to the total enterprise value of the target being acquired.
Acquinex have a total limit of liability of £/€ 32.5m (or other currency equivalent).
The total amount available for recovery is defined as the aggregate limit of liability and sets out the maximum amount recoverable under the policy. For example, a £5m limit of liability would mean you could recover £5m of losses from insurers for a single/multiple breaches of warranty
Yes, although a policy is typically bought prior to completion to ensure that the risk is covered as soon as the transaction has occurred, a policy can be bought after completion.
This is viewed favourably by insurers (assuming the risk is unknown and insurance is not being sought for something that has been discovered) as it indicates that the parties were happy to complete without the insurance ‘safety net’ and thus suggests that a full due diligence has taken place.
Any further questions?