Warranty and indemnity insurance

by Nicholas Lunn, Head of UK, CEE and MEA, Liberty Global Transaction Solutions (GTS), and Alexander Keville, Head of M&A and Private Equity FINEX Global, WTW

A practice note explaining the key features of warranty and indemnity (W&I) insurance in the context of private M&A transactions. The note outlines the purpose of W&I insurance in bridging the gap between a buyer's desire for contractual warranty protection and a seller's goal of a clean exit. It focuses on the characteristics of buy-side policies, which are by far the most prevalent type of policy, and describes the process for arranging cover. The note also provides an overview of the underwriting process, typical policy limits, retentions and common exclusions. It also explores potential policy enhancements that can offer buyers protection 'synthetically' beyond the terms agreed between the buyer and seller in the sale and purchase agreement. It addresses the practicalities of notifying a claim and discusses recent claims experience and important case law.