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Litigation Buyout and Special Situation Insurance

 

Litigation Buyout and Special Situation Insurance

Comprehensive, flexible protection against financial loss following a wide range of events that could prevent the successful completion of Mergers and Acquisitions (M&A).

Product highlights

Large capacity

Highly customised coverage for a range of special situations and their potential outcomes with the potential to have associated large limits.

Flexible coverage

Underwriting and cover are customised to each policy, providing a tailored solution to meet the requirements of any situation or dispute, regardless of the subject matter.

‘Ring fenced’ liabilities

Provides security to businesses engaged in M&A activity by quantifying and separating potential liabilities arising out of the litigation or other event insured.

Ease of reimbursements

Buyers can recover losses directly from the insurer without needing to locate and pursue a seller and its assets.

Exceptional claims handling

Access to our outstanding team of claims professionals who are experienced and specialised in litigation relating to complex transactions, ensuring that your claim will be resolved in a professional and efficient manner.

New Zealand market conditions are currently “ripe” for people looking to sell their business, with indicators including predicted earnings and corporate appetite for deals on a continued positive trend1. With lower regulatory hurdles than other countries, and a stable political and legal environment, New Zealand is also an attractive environment for offshore investors. These factors support the current buoyant M&A activity2 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, including product liability disputes, breach or potential breaches of legislation or regulations, employment, contractual and intellectual property disputes and disputes relating to the operational or trading history of an organisation.

Litigation buyout insurance from AIG can be used to facilitate an M&A transaction by ‘ring-fencing’ liabilities, potentially removing a deal-breaking obstacle. This insurance solution can also negate the requirement for the use of escrows or indemnities, providing certainty and finality to both parties in the transaction.

1 KPMG New Zealand M&A Predictor, September 2014

2 Ibid.

Litigation buyout insurance coverage allows companies to ‘de-risk’ a business by removing or reducing the contingent liability arising out of litigation, which may otherwise represent an unquantifiable liability.

The insurance provides certainty to an insured business as the potential liability arising out of the litigation is quantified and ‘ring-fenced’.

Coverage is usually for a specific known risk, lawsuit or claim, but may also allow for threatened litigation or an anticipated claim. It can also be written to cover a portfolio of claims arising out of the same facts or circumstances.

Businesses may choose to include defence costs in the insurance program limit, or may choose to only cover the amount of any award of damages.

Businesses that have incurred a contingent liability, most commonly a dispute or litigation, that wish to ring-fence any associated liabilities, often in anticipation of a sale or divestment.

  • Bespoke products designed for M&A transactions, based on over 40 years’ experience working with New Zealand businesses, and over 95 years serving customers around the world. 
  • Local expertise backed by a worldwide network of highly-skilled insurance professionals, helping to make complex deals a reality.
  • Financial strength and stability – large capacities available, reducing the need for multiple insurers.
  • Access to our highly-skilled and specialised team of claims professionals who will process your claim efficiently and professionally.