Warranty & Indemnity Insurance
In today’s M&A environment, buyers and sellers are increasingly seeking ways to complete transactions with greater certainty, reduced post-completion exposure and a more efficient allocation of risk. Warranty & Indemnity (W&I) Insurance has become a valuable tool in facilitating transactions by protecting against financial losses arising from breaches of warranties and indemnities contained within a Sale and Purchase Agreement (SPA).
Historically, sellers were expected to stand behind extensive warranty packages, often resulting in escrow arrangements, deferred consideration or lengthy negotiations regarding liability caps and claims periods. W&I Insurance helps overcome these challenges by transferring much of the transaction risk to an insurer, enabling buyers to secure meaningful protection while allowing sellers to achieve a cleaner exit with limited ongoing liability.
Protection to Purchasers
Buy-side W&I policies are the most commonly utilised structure and provide protection to purchasers where warranties given by the seller are later found to be inaccurate. Cover can extend across a broad range of operational, legal, financial and commercial matters, offering buyers confidence that unforeseen issues discovered after completion will not undermine the value of the transaction.
W&I Insurance is particularly prevalent in private equity transactions, management buyouts, secondary buyouts and strategic corporate acquisitions. It can also play an important role in competitive auction processes, helping bidders differentiate their offers by reducing reliance on seller recourse and facilitating a smoother path to completion.
Commercial Objectives
In many cases, W&I Insurance forms part of a wider transactional risk strategy. Policies can be structured alongside Tax Liability Insurance, Contingent Risk Insurance, Title Insurance and other specialist solutions designed to address identified risks within a transaction. By tailoring the insurance package to the specific circumstances of a deal, parties can often overcome obstacles that might otherwise delay or prevent completion.
At its core, Warranty & Indemnity Insurance provides certainty. It helps protect buyers, supports sellers seeking a clean exit and allows advisers to focus negotiations on commercial objectives rather than risk allocation. Whether supporting a private equity investment, corporate acquisition or complex business sale, W&I Insurance has become an established and highly effective tool for facilitating successful transactions.
Richard M. Henry
Contact us today if you are considering a transaction and would like to discuss Warranty & Indemnity Insurance or broader transactional risk solutions.
MFSA Financial Services Register Reference Number (Authorised Person ID) JTCLEX-10570