Transactional risk insurance (M&A)
Family of covers designed to transfer risks identified in a merger or acquisition and facilitate closing.
Transactional risk insurance brings together the covers designed to transfer to an insurer risks identified in a merger or acquisition, in order to unblock the negotiation and allocate exposure between buyer and seller. It includes warranties insurance, tax liability insurance and contingency insurance for specific litigation risks. Its logic is to transform uncertainties that could derail a deal, disagreement over a risk, escrow demands, into a bounded insurance transfer. This line has grown strongly with the rise of private equity, which values clean exits and execution speed. For the insurer, it requires legal and due-diligence skills close to those of transaction advisers, and case-by-case underwriting with no law of large numbers. Profitability depends on the discipline of deal selection and the quality of analysis of the underlying contracts.
Textbook case: a private equity fund can combine warranties insurance and contingency insurance to neutralize both unknown risks and a known dispute, securing its acquisition.
transactional risk insurance, M&A insurance, W&I, deal insurance
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