Solutions

We are experts on all aspects of M&A insurance. The team has been at the forefront of developing the insurance market's approach to insuring the risks associated with deals for many years. W&I policies in most markets around the world, for example, are the result of insurers adopting innovations brought to the market by RCA. 

Warranty & Indemnity

What is it?

Warranty and Indemnity (W&I) insurance is a tool for a buyer or seller to transfer risk of liability created by the warranties and indemnities that form part of a share or asset sale agreement in private market mergers and acquisitions.

Why use it? 

W&I insurance is a cost-effective alternative to the traditional means of addressing transaction risks such as purchase price adjustments, escrows, hold-backs or parent company/bank guarantees. Motivations for utilising W&I insurance include:

Achieving a "clean exit": Financial sponsors such as private equity, real estate and infrastructure sellers can close their funds post disposal without the need to provision for future breach of warranty and indemnity claims. 

Enhancing a bid in a competitive auction: Bidders can accept minimal caps on liability from a seller and secure higher limits and longer liability periods under the W&I policy.

Maintain harmony with management: Buyers can rely upon their ability to claim under the W&I policy rather than pursuing management of the target or fellow shareholders. 

Provision of debt: Prospective financiers and lenders will typically insist on the buyer obtaining warranties so that it has some element of protection if issues are discovered post-completion. If the seller is a fund, they are unlikely to want to stand behind their warranties. The proceeds of a policy claim can be assigned to the lender.

Credit Risk: Buyers can rely on any claims being met by a financially secure insurer rather than taking credit risk from a seller.

Tax

What is it?

Tax liability insurance enables a taxpayer to either reduce or completely eliminate financial loss arising from the tax treatment of a particular transaction, investment or other activity in circumstances where the legal conclusions underlying the tax treatment may be subject to challenge by the relevant tax authority.

The policy is crafted to cover the specific financial exposure of the insured in the event of an unfavourable determination by a tax authority, including:

  • the primary amount of tax payable
  • interest and insurable fines and penalties
  • defence costs, including the expenses involved in engaging legal or tax advisors

Why use it?

Tax liability insurance can be an effective risk transfer tool to protect an insured in circumstances where there is an element of uncertainty about the tax consequences arising from:

  • a change in ownership of a company
  • the historic tax positions taken by a target company or its consolidated tax group
  • a re-organisation

The policy can also assist where parties are unable to obtain timely clearances from tax authorities prior to the sale of a target company.

Contingent

What is it?

Contingent liability insurance is a tailored solution designed to cover specific risks that would likely be excluded under other forms of insurance.

The policy is designed to cover the specific financial exposure of the insured in the event of an adverse outcome in the resolution of the contingent liability, including: 

  • damages or settlement costs
  • defence costs, including the expenses involved in engaging legal or other professional expert advisors
  • additional cover for any other potential liabilities that might arise in the context of a particular dispute

Why use it?

The insured can transfer the risk of actual or potential contingent claims to an insurance policy and ring-fence any future financial exposure.

Contingent liability insurance can also release potential opportunities for sale or acquisition that might be precluded by a particular dispute or risk.

The policy can be tailored to the needs of the insured, regardless of the subject matter or jurisdiction. Cover can range from something as simple as a breach of a supply contract or dispute with an employee through to highly complicated intellectual property or product liability litigation. 

Environmental

What is it?

Environmental liability insurance covers companies for financial loss arising from the occurrence of specific environmental events.

The policy provides long-term protection against identified environmental risks as well as unknown sudden, accidental, gradual and historical pollution liabilities that have not been identified by the parties during an M&A transaction.

Cover under the policy typically includes the following:

  • clean-up costs
  • third party bodily injury and property damage
  • business interruption expenses
  • legal costs

Why use it?

The insured can transfer actual or potential environmental risks to an insurance policy and ring-fence any future financial exposure.

Environmental liability insurance can also release potential opportunities for sale or acquisition that might be precluded by a particular identified environmental risk.

The policy can be taken on by or on behalf of either a buyer or a seller in an M&A transaction.