Trends in the S&I insurance market and their impact on M&A contract practice.

Warranty and indem­nity insu­ran­ces have been an inte­gral part of M&A tran­sac­tion prac­tice for many years. Here, risks of the target company that are the subject of warran­ties and indem­ni­ties from the sellers are covered by special tran­­sac­­tion-rela­­ted S&I insu­rance. In the econo­mic result, the insu­rance company’s liabi­lity fully or parti­ally replaces the sellers’ own liabi­lity. Howe­ver, from the buyer’s point of view, the complete exclu­sion of the seller’s own liabi­lity is not unproblematic.

Typi­cally, S&I insu­rance poli­cies today are struc­tu­red as buyer poli­cies, i.e. the insurer under­ta­kes to the buyer to vouch for the seller’s warran­ties and indem­ni­ties under the Sale and Puch­ase Agree­ment (SPA). It is ther­e­fore the respon­si­bi­lity of the purcha­ser to take out S&I insu­rance. Howe­ver, in the context of bidding proce­du­res, the S&I insu­rance solu­tion is usually alre­ady prepared by the seller. An insu­rance broker commis­sio­ned by the seller (but usually paid by the buyer when the insu­rance policy is concluded) obta­ins non-binding offers from insu­r­ers on the basis of the seller’s sample SPA and summa­ri­zes them in a Non-Binding Indi­ca­ti­ons (NBI) Report, which is made available to the bidders in the data room.