Introduction
Warranty and indemnity insurance (W&I
Insurance) is fast becoming a common instrument to
de-leverage deal risk in the Australian M&A landscape. In the
past, acquirers of W&I Insurance have typically been private
equity funds, venture capitalists and other 'sophisticated'
investors. This is changing with W&I Insurance becoming more
common in all types of negotiated M&A transactions, with
general corporates and individuals alike being lured by the
benefits that such insurance has to offer.
What is W&I Insurance?
In a nutshell, W&I Insurance provides cover for losses
arising from a breach of warranty (or in certain cases under an
indemnity) in connection with a merger or acquisition. It is
essentially the use of insurance capital (eg, an insurer's
balance sheet) to facilitate a transaction by transferring the
transaction risk from the seller or the buyer to the insurer.
