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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.
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.
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.
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.