Gaps In W&I Insurance Coverage

Warranty and Indemnity (W&I) insurance has become an established feature of Finnish transactions in recent years. It is a customized insurance product through which the parties to a transaction transfer deal-related risks to an insurer. At its best, W&I insurance serves both the buyer and the seller, but in practice, its coverage is often understood to be broader than it actually is. This article examines what W&I insurance is all about and what its typical coverage gaps are.

What is W&I insurance?

In a transaction, the seller typically provides a broad set of warranties regarding the state of the target company. These are recorded in the sale and purchase agreement as so-called representations and warranties, in which the seller guarantees that the information provided about the target company is accurate and that it is in the condition the seller has represented it to be.