Transactional Liability Insurance

Skyscrapers in London


Transactional liability insurance (“TLI”) helps to protect buyers and sellers from the risks associated with M&A transactions and has become an important tool for deal facilitation. TLI covers a broad range of products, including:

  1. warranty and indemnity (“W&I”);
  2. tax;
  3. title;
  4. environmental;
  5. litigation;
  6. intellectual property; and
  7. contingent risk.

Of these products, W&I is the most frequently used, particularly where there is: (a) private equity / financial investor involvement; (b) a number of different sellers; and/or (c) rollover management (as discussed further below). 

The other products are also regularly used, typically in circumstances where there is an issue or risk that is known by the transaction parties. In particular, there has been a marked increase in demand for contingent risk insurance – for example, in respect of tax liabilities arising from corporate reorganisations and judgement preservation policies for litigation matters being appealed.


  • W&I provides cover for losses arising from a breach of a warranty and claims under a tax indemnity / covenant in connection with the M&A transaction.
  • Importantly, W&I covers unknown or undisclosed matters.
  • Insurers require the insured to carry out comprehensive due diligence (usually: (a) legal; (b) financial; and (c) tax); most insurers require this to be carried out by external advisors, however some insurers can accept internal due diligence.
  • The W&I market has grown exponentially over the last 10 years and the product has developed an increasingly solution-driven approach: reduced pricing, improved processes and enhanced coverage has made W&I a suitable solution for most M&A transactions.
  • The W&I policy is tailored to the specific transaction documents, providing back-to-back cover for the transaction warranties (insofar as possible).
  • As standard, the W&I policy will cover: (a) general warranties for 2 years; (b) fundamental warranties for 7 years; and (c) tax warranties and a tax indemnity / covenant for 7 years.
  • Insurable limits range from £500k – £1bn on a single transaction.
  • Minimum premiums as low as £10,000.
  • The W&I policy can be incepted in as little as 5 – 7 business days.


W&I benefits both the sellers and buyers of a business.

  • The benefits of W&I insurance to a seller include:
  • providing the seller with a ‘clean exit’ from the transaction, allowing the full sales proceeds to be used immediately, without the need for a retention or escrow amount;
  • enabling the seller to give warranties to the buyer, even where the target is being sold for a nominal amount (e.g. £1);
  • enhancing the value and attractiveness of the transaction by providing buyers with full warranty protection in circumstances where the seller is unwilling or unable to provide warranties (e.g. where the seller is a financial investor or liquidators acting in trust); and
  • providing the seller with protection against potential claims after completion of the transaction.


The benefits of W&I insurance to a buyer include:

  • providing alternative recourse where the buyer is unwilling to pursue the seller in the event of a warranty breach (e.g. where there is management rollover or members of the seller continue to be employed by the target after completion);
  • providing the buyer with a single form of recourse where the sellers are disparate or distinct entities/individuals, rather than pursuing each seller individually;
  • giving the buyer protection in circumstances where the seller is unwilling to provide warranties under the transaction documents;
  • granting the buyer with extended warranty coverage, both in terms of scope and time periods;
  • providing the buyer with a solid and professional counterparty in the event of a warranty claim; and
  • making the potential buyer more attractive to the seller due to a reduction in the sell-side exposure.

As a result, W&I has become an increasingly common solution on M&A transactions of all sizes: it is a valuable tool that helps instil confidence into the parties and facilitates a smooth transaction process.

Please get in touch with your local Brown & Brown broker if you would like to find out more.