W&I/R&W Insurance

Warranty & Indemnity (W&I) or Representations & Warranties (R&W – in US) insurance enables deals through the transfer of potential specific risks relating to that M&A transaction, helping to both reduce uncertainty and to close deals more quickly.

Benefits to the Seller

Enables a clean exit
Easing of deadlocks and facilitation of the sale
Immediate distribution of sales proceeds with a reduced need for escrows
A more attractive target
Potential for a higher valuation
Specialist liability coverage

Benefits to the Buyer

Improved certainty of payment due to insurer’s superior credit rating
Protects investment and supports lending for the transaction
Enhances the bid position and enables the transaction negotiations
Increases Board transaction comfort
Protects against future disputes involving target management
First party coverage

Protections features

The result is a W&I/R&W policy with the following coverage features:

Losses resulting from a breach of a seller warranty or a seller’s obligations in a tax deed of covenant
Costs associated with defending claims
Extended duration of cover compared to the survival period in the Sale Agreement
Flexibility with thresholds compared to the Sale Agreement
Fraud on the part of the seller (buyer-side policy only)

Product W&I/R&W

Information and features.

Policy Limit

Aggregate policy limits are typically AUD 1m to 2.5m, and ~10% to 30% of the target’s enterprise value, although a policy limit of up to 100% of the enterprise value can be acquired.

Enterprise Value

AUD 1m to AUD 50m


Our insurers typically apply a deductible of 2% of the enterprise value, dropping upon expiration of escrow or other pre-defined period.

Policy Periods

A policy will provide protection for:

  • 2 years following completion for general warranties, and
  • 5 years following completion for title and capacity warranties, tax warranties and claims under the tax indemnity.

Market-standard exclusions, including:

  • Any fact, matter or circumstances of which the buyer’s deal team members have ‘Actual Knowledge’;
  • Asbestos / pollution;
  • Purchase price adjustments;
  • Underfunded defined benefit pension;
  • Fines and penalties;
  • Excluded and partially covered warranties.

The premium is a one-off cost determined by the limits of insurance required, the nature of the transaction, the jurisdictions, the industry sector and the governing law of the acquisition agreement.

Average premium rates from 3% to 5% of the policy limit.

Legal Fee & Administration Fee

Insurer charges a Legal fee expense agreement to be entered into before commencing formal underwriting. This is to cover the cost of instructing external counsel. Summary reviews are conducted.

Legal fee typically ranges from AU$ 5,000 to AU$25,000 before applicable taxes. The legal fee is charged in addition to the premiums.