R&C: Could you provide an overview of the types of transactional risk insurance and why any of those products might be needed in an M&A context?

Cosentino: There are three products we generally talk about in the context of transactional risk insurance: representations and warranties insurance, tax liability insurance, and contingent liability insurance. Each can be used to protect the parties in an M&A transaction from potential liabilities in the underlying deal, otherwise the buyer or seller will need to assume these risks. Additionally, the allocation of these risks between the buyer and seller can become cumbersome and lead to protracted negotiations or the deal falling apart. The products allow buyers and sellers to efficiently shift the transaction risks to an insurer. This can enhance the deal value for each party, make the transaction process somewhat less adversarial, and facilitate a more orderly and expeditious close.

Jul-Sep 2019 Issue


Clifford Chance