Risk Lounge
Warranty move by Ace to serve specialist markets
One Bermudan underwriter has sought to add capacity to the financial institutions market with a new product aimed at protecting parties in the growing mergers and acquisitions sector.
Ace Bermuda International (Ace) has launched a new primary warranty and indemnity (W&I) insurance policy, designed to provide protection against financial losses arising from breaches of warranties and/or indemnities contained within a sale & purchase agreement.
As the economic downturn prompts a spike in deals as company values fall there is still a fear factor in terms of hidden issues off balance sheets which could well turn what seems to be a great deal into a costly mistake.
The W&I policy is available to both buyers and sellers to insure a party's liability or loss with respect to the breach of a wide range of warranties, including those relating to ownership, intellectual property, audited accounts, contracts, employee matters, compliance and litigation. Ace's policy also covers liabilities arising from an associated tax deed and provides protection in the event that reserves established for the payment of taxes due through the effective date of the transaction are inadequate.
It is not a new area for the underwriter as Ace has written W&I insurance since 2005, however the product has been reshaped to meet the needs of the current economic climate and the fears that both buyer and seller have over the claims made within the contract. The primary W&I insurance policy is available to UK domiciled companies and can be tailored for large, complex acquisitions or is equally suitable for smaller transactions.
Commenting on the launch Charles Davidson, Underwriting Manager, Professional Lines, Ace Bermuda International, said: "Buying or selling a company can be extremely risky, and W&I insurance is becoming increasingly recognised as a mainstream and highly effective corporate finance tool in merger and acquisition negotiations helping to mitigate transactional risks."
Anup Seth, Managing Director, ACE Bermuda International, added: "We offer a valuable combination of highly experienced underwriting, quality service, substantial capacity and financial strength ratings of A+ from both S&P and AM Best. These are critical factors in providing peace of mind for our clients in this 'long tail' class of business where policy periods can be up to six years or more."
