What is W&I Insurance?
Warranty and Indemnity insurance, also known as W&I insurance, is a type of insurance that is designed to protect both the buyer and the seller in the event of a merger or acquisition (M&A) transaction.
W&I Insurance can be purchased by either the buyer or the seller, although it is more commonly purchased by the buyer. The policy provides coverage for losses that may arise from breaches of the seller’s warranties and indemnities, such as financial statements being incorrect, undisclosed liabilities, intellectual property infringement, and other risks.
Overall, W&I insurance can help to mitigate the risks associated with M&A transactions and provide both the buyer and the seller with greater peace of mind.
What does W&I Insurance cover?
In an M&A transaction, the buyer typically wants to ensure that they are not taking on any unknown liabilities from the seller. This is where W&I insurance comes in. The insurance policy provides coverage for losses that may arise as a result of a breach of the seller’s warranties and indemnities.
Warranties are representations and promises made by the seller regarding the condition, quality, and legality of the company being sold. Indemnities, on the other hand, are promises by the seller to compensate the buyer for any losses that may arise as a result of a breach of the seller’s warranties.
Why buy W&I Insurance?
W&I insurance can be purchased by either the buyer or the seller, although it is more commonly purchased by the buyer. The policy provides coverage for losses that may arise from breaches of the seller’s warranties and indemnities, such as financial statements being incorrect, undisclosed liabilities, intellectual property infringement, and other risks. Should there be a breach then the claim can be made against the insurer rather than pursuing the seller.
Overall, W&I insurance can help to mitigate the risks associated with M&A transactions and provide both the buyer and the seller with greater peace of mind.
How much does W&I Insurance cost?
The cost of the insurance policy varies depending on the size and complexity of the transaction, as well as the perceived risk associated with the deal. Typically, the policy covers a certain percentage of the purchase price, and the coverage period usually lasts for a specific number of years after the deal has closed.
For an indicative quote for W&I Insurance please request a quote.
When should I consider W&I Insurance?
Insurers or their lawyers will need time to review key transaction documents such as the sale and purchase agreements and disclosure letters, as well as any due diligence reports which have been prepared for the buyer. Most of the work is carried out in the later stages of the transaction, but generally it will take a couple of weeks for the policy to be agreed.
For further information about how W&I can assist you please Contact Us.
Why work with Continuum?
Our in-depth knowledge of both the industry and the appetite of insurers allows to advise clients on the appropriate solutions to help them protect their business and offer value to their clients. We take a client-centric approach, appreciating that insurance may be a future requirement rather than an immediate need and advise on the timing of policy inception as well as helping with payment schedules and budgeting requirements. Our aim is to advise and assist digital asset firms from seed to flower and become a long-partner with them through their journey to success.
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