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Warranty and Indemnity (“W&I”) Insurance

According to the recent Claims Study from HWF Partners, Warranty & Indemnity (W&I) insurance has increased in the last decade in a buoyant M&A market and is expected to continue to rise in the next years.

W&I insurance can be obtained either by the buyer (buy-side) or the seller (sell-side) in a transaction to protect either the buyer or the seller from unknown or unforeseen liabilities resulting in financial loss from a breach by the seller of the warranties (and/or indemnities) contained in the sale agreement. The majority of policies placed are buy-side.

In a typical transaction, the buyer will seek broad warranties from the seller to protect against losses which the target (or the buyer) may suffer as a result of a breach of those warranties. A seller on the other hand, will seek to limit the warranties it gives to the buyer. W&I insurance is a key tool used to bridge this gap. From the buyer's perspective, a buy-side W&I insurance policy will, subject (usually) to a policy excess, serve as the direct (and in many cases only) indemnity for breach of the warranties given by the seller.

HWF Market Claims Study

Use of W&I insurance has increased over the last 10 years in a buoyant M&A market, particularly in the private equity space, driven by parties to M&A realising the benefits of a buyer having recourse to A-rated insurers whilst a seller is able to achieve a clean exit. This increased reliance on insurance products makes it more important than ever for clients to have confidence in W&I insurance and the ability to recover through claims.

Individual insurers and brokers regularly publish their own claims data, but for a claims study to be of real value it needs to be broader. It needs to capture data from multiple insurers, needs to cover policies placed by multiple brokers, and needs to cover a sufficient lookback period to give a comprehensive view of the claims market.

The recently released HWF study does that. It’s based on anonymized and aggregated data captured from 16 leading insurers in the European transactional risk market, which means that it is the first true independent study of the state of W&I insurance claims in Europe.

The results provide compelling evidence of the importance of W&I insurance. They show tangible benefits to insured parties of a well scoped W&I policy and, ultimately, that there is a well-developed insurance marketplace accustomed to settling claims of all sizes efficiently and pro-actively.

Key takeaways

For the first independent market-wide review of European W&I claims, HWF worked with 16 insurers who have provided data covering over 10,000 policies across a seven year look back period. Please find below the key takeaways.

  • Use of W&I policies has accelerated year on year across a growing number of sectors, jurisdictions and deal sizes.
  • W&I claims are arising widely across sectors, jurisdictions and deal sizes; W&I insurance is not specialised.
  • A material number of claims are being paid; in aggregate there were payments on 5.48% of policies across the review period with almost 10% of policies in 2018/19 resulting in paid claims. These are very significant numbers for an insurance product responding to unforeseeable risks.
  • The losses when claimed were serious: despite 45% of notifications not initially specifying a quantum, 22.36% of notifications were still above 50% of the policy limit.
  • 43.75% of notifications related to seller non-disclosure, fraud and third-party claims. This is when the product is invaluable. Those risks simply can’t be diligenced.
  • 94.58% of claims were paid within 2 years, with 24.75% of claims settled within 12 months. This is far quicker than any resolution in a non-insured context.
  • In light of the payment rate, and assuming it continues at the current level, it would not be surprising to see a hardening of rates for W&I in the European market in the future.
  • A W&I insurance policy should be seen as an effective alternative dispute resolution mechanism: the claims process under a W&I insurance policy is more time efficient, less costly, less adversarial, less complex and arguably more likely to be successful than the same claim against a counterparty.

Access the full claims study here


Hemsley Wynne Furlonge Partners Limited (“HWF”) is a specialist transactional risk insurance brokerage with extensive experience acquired from providing advisory services on over 4,000 transactions and structuring over 1,000 bespoke transactional risk insurance policies. 

Recognised as a market leader, HWF consists of former M&A lawyers, tax advisors, transactional risk underwriters and investment bankers who have led share purchase agreement negotiations and due diligence processes.  With experience from premier law firms, accounting firms, insurance companies and financial institutions, our most senior brokers lead each transaction and remain closely involved throughout the insurance placement to ensure flawless execution and responsiveness at each stage.

With offices in London, New York, Dubai, Frankfurt, Munich, Paris and Warsaw, we leverage our international presence and over 200 years of combined experience in the transactional risk insurance marketplace to provide our clients with unparalleled insight and individualized attention on each transaction.

Our clients are global PE houses, sovereign wealth funds, secondaries funds, infrastructure and renewable funds, corporations, venture capital firms, litigation funds, credit funds, alternative asset managers and family offices.



Ellie McRoberts

Ellie McRoberts

Associate Director - HWF Partners

Ellie has considerable experience advising on and arranging bespoke insurance solutions for M&A transactions. Her practice specializes in the placement of W&I insurance and related products for UK and European M&A transactions. Ellie works on transactions across a range of sectors, with a particular focus on private equity, healthcare, real estate and renewable energy. Ellie works with a variety of clients, including corporates, institutional investors, management teams, and private equity investee companies.