Warranty And Indemnity Insurance Comes Of Age

Overview: Warranty and Indemnity insurance is becoming an increasingly common feature of M&A transactions everywhere. This is partly because potential insureds and their advisers are now more aware of the benefits that W&I insurance can bring. It is also in part due to some of the main players in this market now having a much better understanding of the needs of insureds and the commercial constraints in which they operate. In recent years, however, insurers have found ways around the issues, so that sellers and buyers can see real value in taking out such policies. Some of the issues which are being faced include: common law duty of disclosure, it is also unlikely that the insurer will be happy to underwrite on terms, and list of standard exclusions to policies of W&I insurance has shortened over the years. However, there are certain warranties that insurers will not cover. These include: warranties, which are forward-looking; embedded covenants; any matter which is within the knowledge of the insured; and any fines and penalties. Thus, W&I insurance is not a panacea. It will not make a fundamentally unsound business any more viable, as insurers undertake a thorough due diligence process of their own, as well as, in the case of a Buyer’s policy, reviewing the due diligence carried out by the Buyer, before deciding what they are prepared to cover.

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Format: PDF | Size: 90KB | Date: Jan 2003 | Pages: 2