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Transactional Risks

Transactional Risks Insurance is an umbrella term which encompasses Warranty and Indemnity insurance (“W&I”), Tax Insurance and Contingent Risk Insurance.

  • A mechanism for transferring risk by stepping into sellers’ shoes and protecting against loss suffered as a result of a breach of warranty.
  • Covers loss or liability arising from unknown or undisclosed matters only.
  • Can be purchased by either a buyer or a seller.
  • Covers the buyer against the seller’s misrepresentations (both innocent and fraudulent).
  • Two key advantages over a seller-side policy:
  • The insured can claim directly against the insurer (i.e. without having to pursue recourse against the seller or warrantor(s)); and
  • Provides indemnification in respect of the seller’s fraud.
  • Offers liability protection to the seller for innocent misrepresentations in M&A transaction documents.
  • Designed to respond in the event that the buyer brings a claim for a breach of warranty or a claim under the tax indemnity against the seller.
  • Enables a seller to ring-fence the risks associated with the disposal.
  • Transfers a known or uncertain tax liability from the insured’s balance sheet to an insurer.
  • Provides a quicker and confidential alternative to a tax authority clearance.
  • The insurer will indemnify the insured for financial loss arising from a challenge from a tax authority.
  • Available both pre or post M&A transaction (or on a standalone basis).
  • Covers identified or known contingent risks which are typically the subject of a specific indemnity in an M&A transaction.
  • May also be provided for identified “one-off” issues which are not necessarily related to an acquisition or a disposal.