W&I

The term “W&I” typically refers to Warranty and Indemnity Insurance (W&I Insurance), which is commonly used in mergers and acquisitions (M&A) transactions. This type of insurance provides coverage for financial loss arising from breaches of warranties (promises about the business) and indemnities (specific compensation commitments) made by the seller in a sale and purchase agreement. Here’s a quick overview:

Purpose of W&I Insurance
Risk Transfer: It allows the buyer to transfer certain risks associated with the purchase to an insurance provider instead of holding the seller solely responsible.
Facilitates Negotiations: W&I Insurance can help simplify negotiations by reducing the need for extensive seller liability caps or long negotiation processes over representations and warranties.
Protects Both Parties: It covers potential unknown liabilities for the buyer and reduces the seller’s post-sale liabilities.
Types of W&I Policies
Buyer-Side W&I Insurance: Commonly purchased by the buyer, this policy covers the buyer for losses due to warranty breaches by the seller.
Seller-Side W&I Insurance: This is less common and typically covers the seller in cases where they are liable for breaches of warranties or indemnities after the sale.
Common Coverage Areas
Tax Liabilities
Employee and Pension Liabilities
Environmental Issues
Legal and Regulatory Compliance
Intellectual Property Rights
Limitations
W&I Insurance usually excludes coverage for known risks, forward-looking statements, and certain compliance-related liabilities. It’s essential to consult with insurers and advisors on these exclusions to structure the policy effectively.