M&A Insurance in Real Estate

At the same time, the seller may want to limit its liability under the share purchase agreement and gain direct access to the sale proceeds. The M&A insurances can assist with a number of these steps, we list some of the most common insurance solutions below.

Warranty & Indemnity Insurance

The most commonly used M&A insurance in real estate transactions is the Warranty & Indemnity insurance (W&I insurance), which provides a buyer with financial protection for potential breaches of the seller’s warranties under the share purchase agreement or the asset purchase agreement. The W&I insurance can benefit both the buyer and the seller in a transaction, inter alia (i) the seller may achieve a ”clean exit” and lowered opportunity costs (e.g. the need of escrow may be eliminated), (ii) safeguards the relationship with retained management and key personnel, any claims from the buyer would be directed to an insurance provider instead of said management, (iii) facilitates the negotiations between the parties, as the W&I insurance may provide for a broader warranty catalogue compared to an uninsured transaction, and (iv) the buyer can avoid directing several claims to a scattered group of sellers, as potential claims are directed to a single insurance provider.

M&A Insurance for the Project and Construction Industry

A specifically tailored W&I insurance is also available for transactions within the project and construction industry. In this scenario more known as “Forward Purchase Insurance” or “Forward Funding Insurance”, this insurance is used in relation to a forward purchase/forward funding of real estate and/or ready-to-build windfarms or solar parks. These types of projects are often characterized by long interim periods between signing of the share purchase agreement and completion, as the projects often contain various construction milestones that need to be reached before completion. Through a tailored W&I insurance, the buyer may achieve financial protection for potential breaches of the seller's warranties under the acquisition agreement - both at the signing of the transaction documents and at completion – while the seller may achieve a “clean exit”.

You can find more information about the W&I insurance here.

Additional M&A Insurances

In addition to the W&I insurance and Forward Purchase Insurance/Forward Funding Insurance, there are additional M&A insurance solutions available for real estate transactions, such as tax liability insurance (which may cover certain known tax and VAT risks) and other known risk insurance solutions. You can find more information about these insurances here.

Traditional Property and Construction Insurances

In addition to M&A-related insurance solutions, Söderberg & Partners have a large team of insurance specialists for the real estate sector. Please do not hesitate to reach out to us should you want more information or if you want to talk to our specialists.