Posted on July 9, 2015
Warranty & Indemnity Insurance (also known as Reps & Warranties Insurance) is one of a suite of insurance policies which fall under the banner of Transactional Risk Insurance. Although this cover has been around for some time, a more buoyant M&A market and increasing awareness of the product are leading some analysts to believe that Representation and Warranty Insurance may be a hot topic in 2015. A buy side policy will enable a purchaser to recover costs directly from insurers without having to approach the seller following a breach of a warranty or representation made in the acquisition agreement.
A sell side policy protects the seller from claims by the buyer which may be made against them in respect of a breach or indemnity event.Warranty & Indemnity Insurance can provide real comfort to parties engaged in mergers acquisitions and recapitalisation. The benefits of having a policy in place include:
- Direct access to insurers for the buyer in the event of an alleged breach – no need to involve the seller.
- Having a policy in place can expedite a sale by removing potential obstacles to closing such as indemnity negotiations;
- The seller may be able to release monies to their investors by avoiding escrows or having to make account provisions providing a clean exit strategy;
- If there is a problem agreeing warranties, a policy can provide comfort for both sides
Pii have access to several markets who have expertise in this area of insurance cover. If you are interested in seeking a quotation/indication, please contact Sandy Mooneeapen, at [email protected] .