Although transactional liability insurance has been around since the late 1990s, the service has only recently picked up momentum. As policies become more accessible and risk aversion remains high, many deal professionals have turned to such coverage to shift the burden of risk for certain deals to the insurance markets. The risk mitigation provides a competitive advantage in many processes.
There are two primary types of transactional liabilities insurance: representation & warranties insurance and contingent risk insurance. Representation & warranties insurance, which is the more popular, is primarily used for covering unknown risks and typically is 1.5-3% of the insurance limit. Contingent risk insurance is used to help cover likely risks like skeletons identified during diligence or unique transaction structures and typically is 3-8% of insurance limit.
In the below webinar, Dan McGrath of Maloy Risk Services and Richard French of Howden Group explain how M&A insurance can benefit both the buy-side and the sell-side.