W&I Insurance

Warranty & Indemnity insurance (W&I insurance) is an insurance product that covers the risks arising from breaches of warranties and indemnities in a share or asset purchase agreement. If it emerges after closing that a warranty given by the seller was incorrect, the insurer steps in instead of the seller and compensates the buyer for the loss incurred.

In German Mittelstand M&A, W&I insurance has become a standard instrument. It allows the seller a clean exit without long-term liability provisions, while the buyer gains a solvent counterparty for warranty claims. Particularly in auction processes and in a share sale it increases transaction certainty. The premium typically ranges between 0.8 and 1.5 percent of the insured sum.

The policy is usually negotiated alongside due diligence as part of the M&A advisory and picks up typical points of dispute from the term sheet. It is especially common in a share deal, where the company transfers along with all its historical risks.