Warranties and Indemnities Insurance
Insurance for managing risk in M&A transactions
Warranties and Indemnities (W&I) Insurance is commonly used in mergers and acquisitions to transfer certain transaction-related risks to an insurer. Policies are structured to address financial losses arising from breaches of representations, warranties, and specified indemnities set out in the sale and purchase agreement.
W&I insurance may be arranged for buyers or sellers and is often used to support transaction negotiations by clarifying post-completion risk allocation, subject to policy terms and conditions.
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What Is Warranties and Indemnities Insurance?
Warranties and Indemnities (W&I) Insurance is a form of transaction liability insurance used in mergers and acquisitions. It is designed to cover certain financial losses that may arise from breaches of representations, warranties, or specified indemnities set out in a sale and purchase agreement.
In a typical M&A transaction, sellers are responsible for liabilities relating to the period in which they owned the business. If issues relating to those liabilities are identified after completion and result in financial loss, responsibility would normally rest with the seller, subject to the terms of the transaction.
A W&I insurance policy can be arranged to transfer some of this risk from the buyer or seller to an insurer. The policy responds in line with its terms and conditions where a covered breach of warranty, representation, or indemnity results in a financial loss.
W&I insurance does not replace the underlying transaction documentation. Instead, it operates alongside the sale and purchase agreement, responding to covered claims in accordance with the policy wording and agreed exclusions.
How W&I Insurance Works in an M&A Transaction
In a mergers and acquisitions transaction, the sale and purchase agreement sets out representations, warranties and, in some cases, specific indemnities relating to the target business. These provisions allocate risk between the buyer and the seller in respect of matters such as financial position, compliance, taxation and operations.
Under a Warranties and Indemnities (W&I) insurance policy, the insurer agrees to cover certain financial losses arising from breaches of those representations, warranties or specified indemnities, subject to the policy wording, limits and exclusions.
The policy operates alongside the transaction documentation. If a covered breach is identified after completion and results in a financial loss, the insured party may be able to make a claim against the insurance policy rather than pursuing recovery directly from the counterparty to the transaction.
W&I insurance can be structured for either the buyer or the seller. Buyer-side policies are more common and are designed to respond to losses suffered by the buyer, while seller-side policies may be used to limit ongoing exposure following completion, subject to insurer terms.
The availability and scope of cover will depend on factors such as the nature of the transaction, the due diligence undertaken, the warranties provided, and the insurer’s underwriting assessment.
Who Can Arrange W&I Insurance (Buyers and Sellers)
Warranties and Indemnities (W&I) Insurance can be arranged by either the buyer or the seller in an M&A transaction, depending on how the parties choose to allocate risk and structure the deal.
Buyer-side W&I insurance is the more common approach. Under a buyer-side policy, the buyer is the insured party and may be able to claim under the policy for covered financial losses arising from breaches of warranties or representations given by the seller, subject to the policy terms, conditions and exclusions.
Seller-side W&I insurance may also be arranged in certain circumstances. In this case, the seller is the insured party and the policy is designed to respond to claims brought by the buyer, potentially limiting the seller’s ongoing exposure following completion, subject to insurer approval.
The choice between buyer-side and seller-side W&I insurance will depend on a range of factors, including the transaction structure, negotiation dynamics, and insurer underwriting considerations.
What Is Typically Covered and Excluded
Typical Areas of Cover
Subject to the policy wording, W&I insurance may respond to certain financial losses arising from breaches of representations, warranties, or specified indemnities given in connection with an M&A transaction.
Cover may include losses relating to areas such as:
- Financial statements and accounts
- Tax matters (where covered by warranties or specific indemnities)
- Compliance with laws and regulations
- Employment-related matters
- Ownership of shares or assets
- Contracts and commercial arrangements
Typical Exclusions
W&I insurance policies will also contain exclusions and limitations, which vary depending on the transaction and insurer.
Common exclusions may include:
- Known issues identified during due diligence
- Matters disclosed in the transaction documentation
- Forward-looking statements or projections
- Certain environmental liabilities
- Pension underfunding or specific tax risks (unless expressly covered)
- Fraud or dishonesty by the insured party
W&I insurance does not provide blanket cover for all transaction-related risks. Each policy is negotiated on a deal-by-deal basis, and cover is subject to specific terms, conditions, limits, retentions, and exclusions.
Specialist transaction risks, such as identified tax exposures, may require separate or standalone insurance solutions.
Other Forms of Transaction Liability Insurance
Tax Indemnity Insurance
In addition to Warranties and Indemnities (W&I) Insurance, other forms of transaction liability insurance may be used in M&A transactions to address specific, identified risks.
Tax Indemnity Insurance is designed to cover the financial impact of a known or identified tax exposure that has been identified during the due diligence process or arises from a particular transaction structure. Rather than providing broad transaction cover, tax insurance is typically arranged to address a specific risk or issue.
A tax indemnity policy may be arranged for the benefit of the buyer, the seller, or the target company, depending on the structure of the transaction and the nature of the risk being insured. Cover is subject to insurer underwriting, policy terms, conditions, limits and exclusions.
Tax Indemnity Insurance is often considered where a potential tax exposure could otherwise affect pricing, deal structure, or post-completion negotiations, and where the parties prefer to transfer that specific risk to an insurer rather than rely on contractual indemnities alone.
Tax Indemnity Insurance operates alongside the transaction documentation and does not replace broader W&I insurance. Each policy is negotiated on a case-by-case basis to reflect the specific tax risk being insured.
Policy Limits, Retentions and Policy Terms
Warranties and Indemnities (W&I) Insurance policies are structured with defined policy limits, retentions, and specific terms that determine how and when cover may respond. These elements are agreed as part of the underwriting process and will vary depending on the transaction, risk profile, and insurer appetite.
The policy limit represents the maximum amount payable by the insurer in respect of covered claims under the policy. Limits are generally set by reference to the transaction value and the level of cover sought, subject to insurer underwriting criteria.
A retention (sometimes referred to as a deductible) usually applies, meaning the insured party is responsible for losses up to a specified amount before the policy responds. Depending on the agreed structure, retentions may reduce over time or fall away entirely.
In addition to limits and retentions, W&I insurance policies include specific policy terms, such as policy duration, notification requirements, exclusions, and conditions. These are documented in the policy wording and assessed on a transaction-by-transaction basis.
Policy terms commonly address:
- The level and application of policy limits
- The structure and duration of any retention
- Policy duration for different warranty categories
- Notification and claims procedures
- Transaction-specific exclusions and limitations
- Alignment with the sale and purchase agreement
W&I insurance is a negotiated product, and policy terms will differ between transactions. All cover is subject to insurer underwriting and the terms and conditions set out in the policy wording.
Claims under W&I and Tax Indemnity Insurance
Claims under Warranties and Indemnities (W&I) Insurance and Tax Indemnity Insurance are handled in accordance with the policy wording and agreed notification procedures. If a potential breach or insured tax issue is identified, the insured party is required to notify the insurer within the timescales set out in the policy.
The insurer will assess the claim based on the policy terms, the transaction documentation, and the circumstances giving rise to the alleged loss. Any response to a claim, including whether and to what extent it may be covered, is subject to the policy’s conditions, limits and exclusions.
Our role is to support clients throughout the claims process by assisting with notification, liaising with insurers and relevant advisers, and helping to manage the process in line with the policy requirements.
Policy limits, conditions and exclusions apply. Please refer to the policy wording for full terms and conditions.
Warranties and Indemnities Insurance FAQs
What is Warranties and Indemnities (W&I) Insurance?
Who can arrange W&I insurance?
What types of transactions are suitable for W&I insurance?
What is typically covered under a W&I insurance policy?
What is not covered by W&I insurance?
How does W&I insurance interact with the sale and purchase agreement?
What is a retention under a W&I insurance policy?
How long does W&I insurance last?
How are claims handled under W&I insurance?
What is Tax Indemnity Insurance and how does it differ from W&I insurance?
Contact the Team
Mike Watkinson Dip CII
- Business Development Director
- 01253 598973
- mike@rowlands-hames.co.uk
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Testimonials
Many thanks to Rowlands & Hames, especially Gary Baxter who has helped and guided us through our insurances this last year, and problems [claims] when necessary. Your help and support are very much appreciated.
Further to all our communications and dealings over the last few months, we would like to thank you for your tenacity and achieving this result in respect to settling the above claim for £800.00. Please accept our thanks for keeping at the insurers and ensuring this favourable outcome.
I would have no hesitation in recommending Rowlands & Hames and Gary to individuals or corporate structures requiring insurance services. It is great peace of mind to know that a competent individual and broker is supporting both myself and my companies.
In response to the handling of a claim:
“Tony Swallow was excellent, a credit to Rowlands & Hames."
Further to all our communications and dealings over the last few months, we would like to thank you for your tenacity and achieving this result in respect to settling the above claim for £800.00. Please accept our thanks for keeping at the insurers and ensuring this favourable outcome.
Rowlands & Hames have always provided good advice, and have consistently ensured that my clients and I have appropriate and cost-effective insurance cover in place at all times, regardless of the complexities of the circumstances. Their claims-handling support is second to none in my experience.
Thank you so much for all of this and to Mike and Paul for making life so straightforward with renewal yet again. Our director has total confidence in the service you provide and is grateful for our longstanding partnership.
That’s great news Thanks for your persistence with this matter I am sure it made all the difference. It is nice to see someone go the extra mile for their customers even though it wasn’t really your problem. Once again thanks for the brilliant job and advice.
Regarding our latest newsletter: “What another classic example of Quality Customer Care – Sending out information like this is vital to ALL businesses and not just your Customers – so just to say you guys never cease to impress me.
The insurers were slow to make the payment once the claim settlement had been agreed. Our claims manager Colin chased this on our behalf. The service from Colin was wonderful, he communicated clearly and often and I really felt he was looking after our clam. Colin made the whole process quick and easy and took the stress out of it for us to thank you!
I would like to take this opportunity to commend one of your staff: Mike Watkinson.
This is customer service at its finest and Mike is surely a valuable and valued member of your staff.
Moving forward the team took the reigns in organizing the incident in a precise and methodical way. There were no delays, everyone was on site no later than Monday and everything generally ran smoothly throughout the refurbishment.
We received excellent service, speed and communication from Rowlands & Hames. The team that worked on my property were very knowledgeable, highly experienced, reliable and professional. They kept me up to speed as the job went a long. They were tidy and polite.
Paul has dealt with our business from day one and I have found him to be very knowledgeable and approachable.
We have been dealing with Trevor Taylor for many years and have always found him to be most helpful and professional in every way. His assistance in all aspects of out insurance has proved to be invaluable. I can recommend his service to anyone.
…service from Rowlands & Hames has been exceptional over the years.
I have to add that I have always been impressed by Tony’s help in the past for our commercial business insurance and I am equally so pleased in the way this insurance has been effected.
Just to let you know I have received payment from the insurance company.
May I take this opportunity to thank you and your colleagues for your help with this claim. You made it easier for me and kept me updated along the way.
Keep up the great work guys.
Great customer service from Gary Baxter and his team.
I have dealt with a number of other brokers in respect of our block policy prior to our agreement with R&H and am able to state confidently as the policyholder, I am more than satisfied and recommend without hesitation, the service given by your team being of an exceptionally high standard. Keep up the good work.
Thank you June – your response was very quick as usual, really good service
…the [travel] insurance has been fantastic and sorted everything out very promptly for him – his son is still out there with him and [the travel insurer] have covered all of that so thanks very much to them and you and Mike etc for all your help.
I would also like to inform you that I am leaving next Thursday. I would like to thank you for all your help and hard work that you have supported me with. Your service was incredible and I would recommend you with the highest regards to anyone. Thank you.
Thank you so much Colin to you and Tony for all your all efforts on our behalf. We cannot thank you enough.
I wanted to thank you very sincerely for obtaining the insurance claim monies for me. The system was very trouble free for me. It is a great help, and also gives me much confidence in case there are future problems. Meanwhile, very many thanks for your work regarding this issue.
I found the staff to be very efficient and professional and would recommend your company to anyone. Good job
Following a dispute with an insurer over temporary unoccupancy… “It’s today’s actions that will determine which and how companies come out of this. You have been brilliant and show the true value of having a broker. Catch up soon. Thanks
My associations with Rowlands & Hames goes back 20 years or so. I have always found them exemplary in any advice, claims etc. We recently had what we considered to be a potentially difficult public liability claim with a major client of ours but this was soon successfully concluded by John Isles and his very efficient team. I am extremely pleased with our involvement with this company.
I’ve always had great service from Rowlands Hames so would be happy to ask you for help with other insurances as they come up for renewal.
Many thanks for your assistance, you’ve been first class as always this is why we use professionals like yourselves.
great CSR to help us get our insurances ready for our first 6 employees starting next week
Many thanks to you for your support throughout the claim process. The true value of having a Broker is realised when a claim occurs.
I am grateful and very impressed with the care and understanding R&H’s claims team have shown throughout a stressful and difficult time for me. I got my Fiat Panda back today, all sparkly and repaired; without your excellent handling of my claim, the last few months would have been so much worse as I have recovered from my injury. I have been a customer of yours since Andrew Dalby days and your company has never let me down.
Thank you Paul and it is because of the relationship we have with you, the way you throw everything at getting us the best response from the insurers and the flexible support that you give us that enables us to get on with delivering our work and not being bogged down/ restricted as we have in the past with previous insurers/brokers so again, thank you!
Amazing, thank you so much for your speedy response Rachel, very much appreciated as always
Hi Mike,
My pleasure. Julie has spoken very highly of you too with your help on the management companies.
Thanks Colin. Great work as per usual by R&H. Much appreciated.
Hi Dan,
Firstly, thank you for putting in a late shift the other evening to get all our new insurance policy documents over. All received and I’ve reviewed them and can confirm that all the details are all correct and that all terms and conditions are understood and acceptable. Both - Thanks for all your work on our annual renewal. You make the whole process very straightforward!
Thanks for all of your support in this Mike, Everyone feels better knowing that R&H and yourself in particular are there – I certainly do.
Thank you very much for providing such a detailed review of my insurance options regarding my two BTL (Buy to Let) properties.
I contacted Rowlands & Hames recently regarding a complex business insurance policy. The guidance and advice from Gary was absolutely brilliant. I would not hesitate to recommend Gary and his team.
I am so grateful for Liz Kelly and her huge help in getting the insurance sorted for my property. I have been waiting for 6 months for the transfer of ownership from the land registry and am still waiting. As an executor of my father's will, it has been a long journey. In the last 3 years, I have lost my mother, father, and my partner all to cancer and dealt with probate 3 times now and property. For once, I have felt someone truly tried so hard to sort out the issues, and Liz, no fuss just wanted the right outcome for someone she doesn't even know not knowing as a person my history of loss. Liz, you are an angel. Thank you so much 💓. You deserve a huge Christmas bonus.
Wow what can I say other than yet again thank you to yourself and Colin for all of the hard work you have put into getting a result for us on this, we have gone backwards and forwards and not made it easy for you (certainly not on purpose!) this is an amazing result and we are incredibly surprised and happy! Thanks again both, you really do look after us and if there was an award for it you would win it!
I have had so many brokers emailing me over the last few weeks wishing to discuss how they can help us and I take great pleasure each time in mentioning the ongoing and great relationship we have with our brokers and that they cannot possibly compare – I am right every time!
Dear Paul
Whilst Janet has been your point of contact, and will remain so going forwards, I just wanted to say thank you for your diligence in this matter. We have been impressed by your feedback, and for my part I am relieved that our business interruption cover and documents cover Is now on a floating (non-location specific) basis. This has been a concern during our most recent renewals. We look forward to working with you going forwards, and hope to meet you in person soon.
