Getting business deals over the line is never easy and transactions may falter for many reasons - some technical, some financial, some personal, some geopolitical.
The appetite of the insurance market in recent years to deploy their insurance capital to offer protection in relation to the variety of risks which commonly arise in the commercial world has grown exponentially. From an insurer's perspective a portfolio with a wider spread of different types of risk allows them to dilute their overall risk exposure and is an attractive risk portfolio strategy. From the customer perspective, it gives them greater choice of policy wording, competitive premium pricing and attractive insurer credit rating.
The following is a (non exhaustive) summary of the current types of policies available with a brief description of the purpose and intent of each:
- Warranty & indemnity risks (warranty & indemnity or W&I insurance policies) - provide cover for losses arising from a breach of warranties or indemnities given in transaction documentation and can be for the benefit of either the buyer or the seller.
- Tax risks (tax liability insurance policies) - provide cover for the financial impact of a successful challenge by the tax authorities of tax positions adopted in a wide range of transactions.
- Contingent risks (contingent liability insurance policies) - provide cover for example in respect of risks which the parties to a transaction are unable or unwilling to resolve by way of contractual indemnities, and/or in relation to ongoing or threatened litigation, and/or planning issues, and/or employment issues etc.
- Environmental risks (environmental impairment liability insurance policies) - provide cover where there are known or unknown environmental risks linked to a transaction in circumstances where a party is unable or unwilling to provide an acceptable indemnity.
We have extensive experience working alongside specialist insurance and reinsurance brokers to source the cover being sought. Our role is to ensure the terms and conditions of the insurance policy offer the protection being sought by our clients and to negotiate changes to the policy if required.
These policies will frequently form part of a suite of commercial agreements underpinning the relevant project. It is essential that the insuring obligation of the parties to the project are properly dealt with in these agreements (e.g. liability for premium payments and deductibles, selection of project specific policy as against utilising a party's current insurance programme, correctly identifying which parties have an insurable interest and so need to be an insured party, the relevance of a loss payee provision, the risk of a risk becoming uninsurable during the term of the agreement, etc. etc.).
We have significant experience in drafting and negotiating the relevant clauses to ensure our clients interests are suitably protected at all times.