W&I covers rise over M&A concerns

Financial market uncertainty has boosted global demand for warranty and indemnity (W&I) insurance by 60%, as wary M&A partners seek protection, reports Aon Corporation.

As company buyers increasingly seek to recover damages for financial discrepancies at the point of closure of deals, sellers have turned to W&I coverage as a “weapon” in a buyers’ market, Aon observes.

Company buyers are looking at areas where they can recoup part of the purchase price through a warranty claim, which could relate to accounts, litigation, employees or stock, the global brokerage says. Notably, claims tend to be brought forward after signing of, but before completion of a deal, “which sellers are feeling is an attempt to reduce purchase prices.”

Aon notes that W&I coverage can benefit company sellers in many ways, especially helping conclude deals in a tumultuous economic environment. The brokerage also predicts that W&I-related claims will continue to rise. “Insurance products cannot solve the myriad of economic issues that we now face but it may be worth having a look at them in a fresh light to see if they can assist you in getting that deal over the line,” says Anka Taylor, director of Aon’s transactions liability unit.

This story was originally published by Canadian Insurance Top Broker.