Houthoff & Marsh event: growth of M&A insurance for middle market companies

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Warranty & Indemnity (W&I) insurance has been used for more than a decade in the Netherlands and its popularity continues to increase among middle market M&A deals.

But what is driving the historic and future growth of use? This was explained by top experts from Houthoff (M&A law), Marsh (transactional risk broking) and Castel (specialised insurance) during ACG Holland’s recent networking event.  A lively discussion with the attending members and guests followed.

Transactional risk solutions are insurances to protect or mitigate from two types of risk typically arising from M&A transactions: Unknown and Unforeseen Loss (W&I insurance) and Known and Quantifiable Loss (Tax and litigation buy-out insurance).

Alastair Lowry from Marsh explained that from the broker’s perspective, reasons for use are evolving in combination with increasingly wider possibilities in coverage. He provided details about new coverage (enhancements) secured for clients that would not have been possible a year ago, including innovative synthetic (tax) insurance covers.

Representing the insurer, Sammy Shihab from Castel spoke about topics where coverage is frequently discussed, why some risks can be of concern to absorb, and how insurers are getting better at assessing these risks. He summarized that a lot is possible, especially if discussed at an early stage in the transaction.

Angenita Pex at Houthoff shared legal best-practices regarding the effects on the transaction process if a transactional risk insurance solution is used. An early assessment of W&I insurance is key. The first draft SPA version can be intelligently aligned to the use of the W&I insurance and the expectations towards all stakeholders in the transaction should be properly managed. Angenita also explained areas of attention if W&I insurance is deployed at a later stage in the transaction process.

Transactional risk solutions are beneficial for middle market dealmakers and their middle market company clients. The experts foresee that usage will further increase and their companies will play a leading role in materializing this growth.

A copy of the presentation is below.