Warranty & Indemnity (W&I) Insurance

Why Warranty & Indemnity (W&I) Insurance?

When a business changes hands, the Sale and Purchase Agreement (SPA) includes a series of warranties and indemnities. They’re essentially promises about the state of the business. If any of those statements turn out to be untrue historically, the buyer can suffer a financial loss.

W&I insurance protects both buyers and sellers by transferring those risks to the insurer.

Ready to support your transactions globally

Today, W&I insurance has become the standard tool for managing deal risk. And we’ve been helping dealmakers and advisors use it to their advantage all around the world.

We’ve worked with a range of brokers in the space – and the Miller team is a clear standout.
Deutsche Bank
Their deep market knowledge enables them to achieve fantastic results in tight timeframes.
LDC Group
The team’s strong knowledge of how insurance solutions fit into the M&A process is second to none.
Kirkland & Ellis

What are the benefits?

1. Makes better use of capital

W&I is more cost-effective than traditional methods like escrows, hold backs or parent company/bank guarantees. Savvy dealmakers often call these “dead cash” mechanisms.

2. Creates a clean exit and unlocks immediate funds for the seller

For sellers, W&I offers a true clean exit. Many of our clients have limited their post-completion liability to just £1/$1/1€. But it’s not just a liability gamechanger – it’s one for your liquidity too.

Sellers can receive 100% of their sale proceeds upfront. It’s not tied up in hold-back retentions, or being set aside for future claims – it’s ready to use and reinvest straight away.

3. Delivers claims confidence for the buyer

If a seller’s recourse is capped at £1 (see previous point), a prudent buyer needs another form of protection.

Even if they’re fine with the agreed recourse level, they might still worry about whether the seller can handle any warranty claims. This could be because of:

The seller’s creditworthiness
The risk of being able to recover claims in the seller’s jurisdiction
The risk of fraudulent behaviour (still the area of most significant claims)

A W&I policy helps you address all the above.

4. Enhances a bid in a competitive auction

Sellers can use W&I insurance to create “auction-friendly” SPAs with minimal caps on liability. That then means bidders can secure extended protection through their own policies. W&I effectively bridges the gap between the buyer’s preferred level of cover and the seller’s limited recourse position.

what is warranty and indemnity insurance

5. Facilitates a smoother deal process

W&I policies offer broader protection than the underlying sale documents. For example, they can include enhancements for wider definitions of loss. It removes friction and obstacles, and helps parties close faster.

6. Maintains relationships post-deal

It’s always better for the buyer to claim against a policy instead of against a management team or other shareholders. It maintains trust and keeps everyone moving in the same direction after they complete.

7. Reassures lenders

Lenders sit behind most deals. They typically expect to see warranties in place to protect them if issues come up post-completion.

If the seller is a private equity fund, they might not back their warranties. So a W&I policy gives lenders added confidence.
Insurers can often assign the proceeds from a W&I claim to a debt provider – strengthening the overall deal structure.

8. Minimises claims and credit risk

Buyers like to know a financially secure counterparty is handling any breaches.

Claiming against an A+ rated insurer is usually quicker, cheaper, and more reliable than going after sellers directly.

How a policy works

Policyholder	Usually the buyer but can be the seller if the circumstances dictate.
Policy period	Two to three years for general warranties – up to seven years for tax and title liabilities.
What you’re typically covered for	Financial loss from breaches of warranty or indemnity.
How pricing works	What you pay One-off premium on completion. How it's calculated As a percentage of the policy limit. Rates vary for different deal types, depending on jurisdiction and sector. Typical example in Europe: real estate/asset heavy deals: 0.4 – 0.9% operational transactions: 0.7 – 1.6%. The rate for specific sectors can occasionally rise up to 4%. Factors that can affect pricing The nature and jurisdiction of the target business. The governing law of the transaction. The scope of the warranties and whether you need any specific enhancements.
Key exclusions	Unfortunately, these risks are generally out of scope: known issues forward-looking statements pension scheme underfunding certain fines and penalties.
How much time we need	Typically around three weeks from enquiry to binding – but we can move faster for time-sensitive deals.

WHY MILLER?

Your transactions are complex, time-sensitive and highly demanding. That’s why we choose a partner-led approach where our senior people give you constant support.

And, as a team, we hustle harder than any other M&A broker in the industry.

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