Warranty and Indemnity Insurance
Comprehensive and tailored protection against financial loss resulting from inaccuracies in warranties and indemnities relating to an acquired company or business.
New Zealand has strong market conditions for people looking to sell their business. With lower regulatory hurdles than some other countries and a stable political and legal environment, New Zealand can also be an attractive environment for offshore investors. These factors support the current M&A activity in New Zealand.
As in all markets, however, there are a number of risk factors that can hinder the successful implementation of a merger, acquisition or restructure, includng potential inaccuracies in the warranties and indemnities given by a seller.
Warranty and Indemnity Insurance provides protection from the financial losses that may arise from such inaccuracies and can significantly reduce or remove transaction risk, thus facilitating the completion of the proposed transaction.
A buyer-side policy allows the buyer to recover losses from inaccuracies in the warranties and indemnities directly from AIG without first pursuing recovery from the seller.
A seller-side policy reimburses the seller for losses from warranty and indemnity claims by the buyer.
Each policy is tailored to meet the specific needs of the transaction, with coverage designed to:
- work back-to-back with the recourse and risk allocation agreed between the buyer and seller in the acquisition agreement,
- mirror the minimum claim provisions (de minimis and retention thresholds) and other limitation language in the acquisition agreement,
- match the warranty survival period under the acquisition agreement (including any extended period for tax) – extendable if required, and
- cover first and third party claims and associated defence costs. Cover on a buyer-side policy will also respond to fraud by the seller.
- Businesses involved in corporate acquisitions or disposals and seeking protection from financial loss resulting from inaccuracies in warranties and indemnities given by a seller as part of a transaction.
- The named insured under a Warranty and Indemnity policy can be the seller or buyer of a business, or other interested parties, including a new company, special purpose vehicle or a guarantor.
For any enquiries about purchasing, renewing or making a claim on an AIG business policy, please contact your insurance broker or find a broker here.