If you are already experienced with W&I, please select:
What is W&I Insurance?
W&I is a deal facilitation tool. In any M&A transaction both Buyers and Sellers face a range of potential exposures during the deal negotiation and after the transaction has completed. Regardless of the thoroughness of the disclosure process and the due diligence undertaken, there is always an element of the unknown.
W&I insurance, also known as M&A insurance or representations and warranty insurance (R&W), can be purchased by a Buyer or a Seller in an M&A transaction to protect against financial loss arising from an unknown or undisclosed matter that is covered by the warranties or tax indemnity agreed between the parties. The parties can deal with identified risks as part of pricing or other deal mechanisms, but cannot plan for the unknown.
In short: a Buyer needs W&I insurance to protect against unforeseen liabilities (e.g. in order to protect its investment model) and a Seller needs W&I insurance in order to cap any potential liabilities and to obtain a ‘clean exit’.
A W&I policy will offer cover for breaches of the warranties (and tax indemnity) subject to certain exclusions (see below) and financial thresholds similar to a share purchase agreement (SPA) de minimis and basket. A Buyer may also be able to secure more financial cover with W&I insurance than a seller is willing offer.
Brockwell Cover – Headline Details
Limit of Liability
up to £45m (or local equivalent)
typically £70,000 (or equivalent) excluding applicable taxes
no restrictions except pure USA risk (see FAQs below)
cover available on both Buy-side and Sell-side
n.b. Unlike some insurers we can insure individuals.
cover available where the seller’s financial exposure is nil or £1
up to a maximum of 7 years
nil excess as standard for real estate / renewables transactions
We are able to offer tailored W&I products to specifically cater to Sell-side insurance, secondaries transactions, fund wind-up, public-to-private, JV partner exits, asset purchases, or Distressed Transactions. Contact Us for details.
See the FAQs below for further information.
Why choose Brockwell?
We are experts in M&A insurance. Our Team has more than 50 years of combined experience with transactional insurance products dating back to 2004. This market-leading expertise means that your M&A transaction is in safe hands with Brockwell.
All service providers involved in an M&A transaction need to facilitate the process and our experienced M&A professionals can fit seamlessly into a transaction to help get the deal done. Unlike other W&I insurers, we have in-house tax and accounting expertise with excellent M&A/W&I experience which allows us to provide a more agile service without reliance on external advisers.
Clients need the best cover possible to protect their position and our Team will proactively look for opportunities to assist clients with risk management. For example, we may be able to offer cover on a standalone basis with a Tax or Contingent policy for a ‘high quantum : low likelihood’ risk that is identified and therefore excluded from the W&I policy. We are also able to offer a range of enhancements to Buy-side policies.
And we are here to support both during and after your transaction. Our clients can be confident that behind their policy is robust Risk Capital and award-winning Claims expertise.
See About Us for more information about Brockwell.
What are the typical W&I policy exclusions?
W&I will, as a result of exclusions, generally not offer cover:
as a replacement for a buyer’s due diligence or seller disclosure
We rely on due diligence and disclosure to provide us with the information to assess risks. If the buyer’s scope is restricted then we are unable to form a view.
known or identified risks or liabilities
The parties can deal with these as part of wider transaction mechanisms. We may be able to offer cover for certain ‘low’ likelihood risks on a case-by-case basis with a Tax or Contingent policy. We may also be able to offer ‘affirmative cover’ in certain cases.
forward-looking contractual protections
We cannot cover the future operations and performance of the business.
purchase price adjustments (e.g. leakage under a locked box mechanism)
No value needs to be recovered from insurance because it is dealt with in the pricing mechanism and so there is no financial loss suffered.
This is a liability and so we cannot offer protection.
Due to the complex and subjective nature of transfer pricing we can only cover this on a standalone basis with a Tax policy on a case-by-case basis.
secondary tax liabilities
Whether a third party outside of the target group (e.g. the seller) discharges its tax liabilities cannot be underwritten. We may be able to offer cover under a separate Tax policy for liabilities arising from an entity exiting a consolidated tax group or fiscal unity.
availability of tax assets
Tax assets relate to future liabilities and are not typically diligenced or ascribed value. We can consider standalone Tax cover on a case-by-case basis.
The experience of our Team enables us to think outside of the box and offer new, creative coverage where possible – see the enhancements available for Buyers.
Obtaining a quote costs nothing and is very quick. Please visit Quotes.
You can also get a quote by contacting your insurance broker and providing our contact details. We can recommend a specialist W&I insurance broker if you don’t have one.
We typically provide indicative terms of insurance within 48 hours from receipt of the request for terms, but we can provide a quote within 24 hours in exceptional circumstances.
See Process for more information.
Once appointed to underwrite, we can typically issue a finalised policy within five business days. Our Team has underwritten thousands of transactions and we can give an indicative timetable with milestones so that you can plan a route to signing.
In exceptional circumstances and depending on the nature of the target it may be possible to truncate this process.
Our objective is to make the process as straightforward and streamlined as possible for both the broker and the policyholder, to provide as wide a coverage position as possible, and to ensure there are no hold-ups.
See Process for more information.
It is prudent to consider whether insurance will be required early in an M&A transaction process (e.g. to ensure that appropriate due diligence and premium funds will be available) and it is easy to obtain a quote for W&I insurance. Insurance, including who will pay the premium, is often dealt with in the heads of terms.
Once an insurance provider is selected, it can be more efficient to wait until the transaction is reasonably well-progressed (i.e. due diligence is available and the SPA warranties are reasonably settled) before the underwriting process fully commences.
If a Seller is using W&I insurance to cap its liability then a stapled process may be appropriate (see seller FAQs).
Under a buy-side W&I policy, the buyer can proceed directly against the insurer without needing to first having a claim against the seller. Underwriting involves review of the due diligence reports and a short Q&A process with the buyer and its due diligence team in order to understand the target business.
With a sell-side W&I policy, the buyer will claim against the seller who will in turn recover from the insurance (the buyer may not be aware the W&I policy exists). From a process perspective, on a sell-side deal Brockwell will run a Q&A process with the seller and management in order to gain an insight into the business based on their knowledge and will review the data room (vendor due diligence is helpful, but not essential).
W&I insurance can in theory be used to cover contractual protections between any buyer and seller. These contractual protections may either have been agreed between parties or could be synthetic (i.e. within the policy only).
Other than in relation to a private share purchase, W&I can be used to protect against unknown risks arising from asset purchases or changes in JV partners or changes in investors at fund level by standing behind the warranties in a sale agreement.
Equally, where a fund is to be wound-up a W&I policy can be used to cover any outstanding liabilities under historic sale agreements. This allows for proceeds to be returned to investors faster and involves a sell-side underwriting process with the asset manager and their advisers.
Alternatively, it is possible for Brockwell to provide synthetic cover and we have developed a specific product for Distressed M&A using this concept. In short, we propose a standard short-form set of warranties and undertake a Q&A process in order to get comfortable with standing behind those contractual protections. The process is designed to accommodate limited due diligence and restricted seller involvement, whilst providing a buyer with additional comfort. We can provide our proposed warranty pack when we quote.
Synthetic cover may also be used in a public-to-private scenario, e.g. where the transaction is highly confidential and so limited information is available
The cost of W&I insurance will typically comprise the premium, applicable premium taxes, an underwriting fee, and broker commission.
A single, up-front premium is payable. Our minimum premium is typically £70,000 (or equivalent). The applicable insurance premium tax will depend on the location of the policyholder. However, we consider each transaction on its own merits and exceptionally we can offer a lower premium.
Our external expenses vary according to the complexity/size of the risk and the scope of work required. Typically, our external expenses are £10,000 – £20,000 (or equivalent).
The structure of your insurance broker’s commission will depend on the agreement they have with you. Typically, brokerage is a percentage of the premium (and we will provide a gross premium quote, i.e. inclusive of brokerage), but some brokers work to a fixed fee with their clients.
Typically the policyholder pays the premium, but this can be subject to commercial negotiation between relevant parties. For example, in order to obtain a clean exit a seller may contribute toward a buyer’s W&I insurance policy.
A W&I policy will typically include a de minimis threshold and an excess (which acts like an SPA basket).
We can consider enhancing the SPA de minimis where the external due diligence consistently reports (and identifies risks) to a lower level, but generally we do not offer a de minimis below 0.05% of transaction enterprise value. It may be possible to reduce the de minimis to a minimum of £10,000 (or equivalent) in certain exceptional cases, e.g. real estate transactions.
We can offer a fixed or tipping excess (e.g. where a certain threshold is met then the excess is waived) and we can consider providing an excess that is significantly lower than the SPA basket. We can offer a nil excess for real estate / renewables transactions.
Where, for example, limited information is available or a transaction is not ‘vanilla’ (e.g. Distressed M&A) the financial thresholds will be higher than we typically offer.
We can offer:
- three years for non-tax / non-fundamental warranties
- seven years for the fundamental / title & capacity warranties
- seven years for the tax warranties / covenant
Geographically, our primary markets are the United Kingdom, the Nordics, South Africa, and Australasia, but we also regularly insure risks in Northern Europe, CEE, the Baltics, and Asia. We are also insuring an increasing number of deal in Africa and the Middle East. We do not underwrite pure USA market deals, although we will underwrite a target business that has operations in the USA.
Aside from banks and insurance companies, which are outside of appetite, we have no sector specific restrictions on our appetite and have insured transactions in a wide range of sectors.
We do typically require the parties to appoint external professional advisors, and (if Buy-side insurance is required) for there to be external written legal, financial and tax due diligence reports for review.
We require the target to have audited accounts, unless it is a propco SPV or the target could not reasonably have been audited (e.g. it is a start-up).
Please refer to our Risk Appetite for further details.
A market standard tax covenant will typically be covered, but specific indemnities or covenants (e.g. in respect of a known risk or liability identified in due diligence) will not be covered by W&I insurance. However, low risk items can sometimes be underwritten and covered affirmatively in the policy (see enhancements for buyer-side W&I).
Alternatively, we will flag if it might be possible to insure an identified risk on a standalone basis with a Tax or Contingent policy. This requires a separate underwriting process and we would provide separate terms indicating cost and timing implications.
We do not currently offer insurance either to USA insured persons or in respect of purely USA transactions.
Beazley will be primarily responsible for claims handling. They are a highly regarded insurer and have an award-winning claims team that has dedicated claims handlers for transactional insurance risk. Beazley specialise in dealing with complex, multi-jurisdictional matters.
The senior underwriter assigned to your transaction will assist with each step of the claims process.
See Claims for more information.