Warranty and Indemnity (W&I) Insurance in the Commercial Real Estate Sector
In recent years, Marsh has seen heightened demand for warranty and indemnity (W&I) insurance in the commercial real estate sector. As you may be aware, however, W&I policies typically exclude from cover, any known issues relating to real estate assets, and pure title issues are covered independently in a separate title insurance policy.
Title insurance can complement a W&I policy where specific risks or concerns relating to the title of real estate are identified during the due diligence process. Taken out together, W&I and title policies provide a more comprehensive insurance package that delivers the widest possible scope of insurance coverage for transactions involving real estate assets. Binding a title policy in this way, can provide:
- Cover for losses arising from missing deeds, leases, and documents relating to the title of a real estate asset.
- Cover for financial loss arising out a breach of an easement which resulted in loss of rent or value of the asset by virtue of demolition and reconstruction work of a reduced surface area.
- Cover for the risk of enforcement by local authorities and/or co-owners where work has been carried out without the requisite planning consents.
- Insurance against the losses resulting from a third-party challenge to the full ownership and/or use of an asset in a jurisdiction where local practices and registration processes are unknown to the purchaser or are subject to a changing regime.
- Additional insurance capacity for cover relating to title to assets and title to shares to sit above the capacity of a W&I insurance programme.
These kinds of innovative structures can provide a more comprehensive coverage position to streamline and enhance the security of your real estate transactions.