Warranty and indemnity insurance is a type of insurance policy that is designed to protect buyers and sellers in mergers and acquisitions (M&A) transactions. The policy provides financial protection against losses that may arise as a result of breaches of representations and warranties made by the seller in the transaction.
The insurance is typically taken out by the buyer in an M&A transaction and can help to provide greater certainty and protection for both parties. The policy can cover a range of risks, including misrepresentations, breaches of warranties, and other unforeseen liabilities that may arise after the transaction has been completed. It enables the buyer to claim directly from the insurers without the need to pursue the seller.
When taking out Warranty and Indemnity insurance, it is important to ensure that you have the correct level of cover for your needs. This will depend on a number of factors, including the size and complexity of the transaction, the nature of the risks involved, and the type of representations and warranties being made. It is also important to ensure that you comply with any conditions set out in the policy, such as the requirement to disclose any known risks or liabilities.
A seller policy indemnifies sellers for losses resulting from claims made by the buyer for breaches of the warranties and indemnities given in the SPA.
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