Warranty and Indemnity Insurance (W&I)

During sales processes it is common for the seller to provide warranties to the buyer on a broad range of matters about the target such as title to shares, property, employment, tax, intellectual property, and other commercial matters. Participants in mergers and acquisitions (M&A) are also increasingly using representations and warranties (W&I insurance).

Acquiring a new asset or business entails risk, but private equity fund managers, corporate executives, risk managers, and other stakeholders can mitigate some of the uncertainty with the right kind of contractual protections in the underlying purchase agreement. Participants in mergers and acquisitions (M&A) are also increasingly using representations and warranties (W&I or warranty and idemnity insurance).

Marsh’s team of experienced transactional risk professionals can help you build effective W&I insurance policies to protect against unintended contractual misrepresentations made during negotiations of corporate M&A transactions. We can help you build programs that enable you to shift a significant portion of your transactional risk to an insurer rather than retaining it on your balance sheet.

Benefits for Buyers and Sellers

Once considered a specialty insurance product for which there was little demand, R&W insurance is now a commonplace feature in the global M&A landscape. Standard practice in most auction processes is for sellers to instruct buyers to obtain R&W insurance as part of the purchase agreement negotiations. 

R&W insurance generally provides coverage for all representations and warranties of a target company or seller(s) contained in an M&A purchase agreement. The policy protects an insured against financial loss — including defense costs — resulting from breaches of such representations and warranties. This type of insurance can be used by public and private organizations in both traditional change of control transactions and non-control, minority investments.

The vast majority of W&I insurance policies are issued to buyers. However, either party — but not both — can be insured and can benefit from coverage.

For more information, contact your Marsh representative.

Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”