M&A insurance generally refers to a set of products typically purchased in the context of a corporate finance transaction. Of those products, the most common is warranties and indemnities (W&I) insurance, followed by tax liability.

Since the issuance of the first policies in the 1990’s, the total premia in this product segment have grown steadily, reaching over $3bn globally. Private Equity funds have been early adopters of these products as they are the most sophisticated deal makers in the industry, and also due to their need to distribute the investment proceeds among their Limited Partners with the consequential case for cutting potential liabilities arising from warranties provided in sale-side transactions.

As M&A insurance products are becoming better known and understood, a number of key features are signaling what the future of this insurance segment may turn out to be:

• Total premia are expected to rise steadily
  Private Equity as an investor class is growing globally with more institutional capital deployed, hence more transactions will be risk-managed with M&A insurance
• International transactions will use W&I insurance as standard
  International deal makers are seeking to standardize risks and terms of Sale and Purchase Agreements across their transactions. Therefore, when transacting with counterparties in different countries, they are likely to mitigate potential W&I and tax liabilities with insurance
• Some rates will decrease, others will increase
  On the back of a growing claim sample, insurers will be able to underwrite more accurate rates, with the consequence of lowering them for simple transactions while increasing them where claims have proved to be more hurtful
• Platform-based transactions
  The increase in platform-based transactions and bitcoin payments will generate opportunities for W&I insurance to be purchased digitally as an add-on to the underlying deal

If you are considering W&I insurance for your M&A transactions or you act on behalf of your clients, ClosingRisk can provide a competitive quote through its Blockchain-powered platform.

Get in touch to open a free account and start quoting.