De-risking Public to Private Transactions

Facilitating Public to Private Transactions with Warranty & Indemnity Insurance

Warranty and Indemnity (W&I) insurance is increasingly used in friendly Public to Private (P2P) transactions (or take-private deals) and is met with strong support from the insurance market. Insurers are willing to cover a comprehensive suite of fundamental and operational warranties provided these are supported by robust buy-side due diligence. The underwriting process and timeline are comparable to private treaty deals. With this insurance backing, the buyer has protection that it would not otherwise have obtained in the absence of insurance.

The W&I insurance primary market has grown significantly, and with several new insurers and underwriting agencies there is a large pool of insurance capital available to buyers at competitive rates. While global macro-economic factors have created headwinds in H1 of FY 2023, insurers are deal hungry and readily able to deploy capacity to support these take-private transactions.

D&O Risks and Run-off Insurance

A transaction which takes a publicly listed company private has implications for the company’s Directors and Officers (D&O) insurance requirements. Deeds of indemnity executed between the directors and their companies often obligate the company to purchase a seven-year discovery period following a director’s departure to protect the director for future claims that arise from their past activities. This discovery period is commonly referred to as “run-off” insurance.

At the time of a transaction, the incumbent policy will cease to provide “forward moving” cover also requiring the negotiation of a new D&O policy tailored to the requirements of the private company and its new owners.

Following difficult market conditions in recent years, the D&O insurance market is showing signs of easing and new capacity options are providing insureds with increased choice.  These improved market conditions provide an opportunity to achieve competitive outcomes across both price and coverage for the renewal or replacement of existing policies or the arrangement of “run-off” insurance.

Download our insights to learn more about de-risking P2Ps and how Aon can help.