Insurance complements diligence
Warranty and indemnity insurance can support a clean exit and provide a buyer with recourse, but it does not replace investigation of the target. Insurers price and scope cover by reference to the diligence performed, the quality of disclosure, and the risks already identified.
Where review is narrow or inconclusive, the likely result is an exclusion, a higher retention, or a requirement for additional work before inception.
Identify the protection gap
Known matters, forward-looking statements, certain tax exposures, environmental liabilities, and issues dependent on post-completion conduct commonly require separate analysis. The precise position depends on the policy and transaction, so the deal team should map each material risk to a source of protection rather than assume the policy responds.
- Reconcile policy exclusions with the diligence findings and disclosure letter.
- Confirm who bears risk during any gap between signing and completion.
- Review notification requirements before a potential issue becomes a claim.
- Use specific indemnities or price protection where insurance is unavailable.
Coordinate the workstreams
The insurance process should run alongside drafting and diligence, not after them. Changes to warranties, knowledge qualifiers, liability caps, or the transaction perimeter can alter the cover available and should be communicated promptly.
The objective is a coherent allocation among the sale agreement, policy, disclosure process, and residual commercial risk. If those instruments are reviewed separately, gaps tend to appear only when a claim is made.
Discuss the implications
Speak with our advisory team about how these considerations apply to your organisation or transaction.
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