Why buy
Tax Risk Insurance ?
Benefits
Valuable tool during mergers and acquisitions when the parties have identified a tax risk but neither party is willing or able to retain the risk.
Transfers an uncertain liability from the insured to the insurer.
Reduces the insured’s concerns about a potentially adverse challenge from a tax authority.
Allows for improved balance sheet certainty.
Preserve or enhance the value of an asset.
Can enable restructurings and rationalisation of corporate structures.
Facilitates increased fiscal certainty.
Assists in managing negative financial impact.
What is Task Risk Insurance ?
Tax Risk Insurance is an effective solution to protect against the tax risk associated with corporate structures, specific transactional issues and other areas of tax related uncertainty.
Tax Liability Insurance is suitable for risks turning on questions of law rather than fact and is unlikely to be available for repetitive or purely tax motivated transactions or those cases already subject to audit, litigation or on appeal from a tax authority.
Subject to Fusion’s risk assessment, the Tax Risk policy can respond by:
- Mitigating risks arising from tax uncertainty in corporate and fund structures
- Removing the need for an indemnity/ escrow/ price adjustment in M&A transactions
- Wrap around the specific parameters of the liability
- Insure a wide range of jurisdictions and taxes.
Insurable and Rate
Whether a tax risk is insurable and the Rate on Line will depend on a variety of factors, including:
The jurisdiction of the tax authority and the insured
The availability and quality of advice including the technical
The probability of risk discovery
Our analysis of the defense arguments
What is Covered?
The policy will provide protection for:
The estimated tax exposure of the identified tax risk(s)
Interest and penalties
Defense costs
Incremental costs should the proceeds under the Specific
Tax Risk Insurance Policy be themselves taxable (‘Gross Up’)
Product Protection Features
Fusion’s aggregate policy limits typically range from USD / AUD 2m to 25m.
Fusion and the insured will agree on the retention, which is the amount of the loss to be borne by the insured.
A Tax Risk Insurance Policy will be designed to align with the applicable statute of limitations in the jurisdiction of the insured.
The policy will generally exclude losses resulting from:
- Inaccurate facts or omission of material information given by the insured
- Criminal or fraudulent acts or intentional violations of law
- Changes in legislation after the inception date of the policy.
As this is very much a bespoke protection, the range of premiums expressed as a rate on line base don the limit of liability are usually in the range of 5% to 12% in the Asia Pacific region.
Fusion will require an expense agreement to be entered into before commencing formal underwriting.
This is to cover the cost of instructing external counsel.
Legal fees typically range from US$ 30,000 – US$60,000.
The legal fee is charged in addition to the premium.
How does Tax Risk Insurance (Offline) work?
This process usually takes between 1 and 3 weeks.
1 Initial Discussion – contact your advisor, broker or Fusion to discuss the suitability of the Task Risk protection for your transaction.
3 Fusion provides non-binding terms.
4 Appointment of Fusion as Insurer.
5 Detailed Underwriting – assessment of the risk in conjunction with Fusion’s external tax counsel.
6 Negotiation of policy wording.
7 Policy Binding and Signing.
Contact
Request a call back
If you’d like to have a conversation with one of our team, please send us your name, email and phone number and we’ll get back you to as soon as possible.
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