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📋 '''Company disclosure letter''' is a confidential document delivered by the seller or the target company to the buyer in connection with an insurance-sector [[Definition:Sale and purchase agreement (SPA) | sale and purchase agreement]], setting out specific facts, circumstances, and exceptions that qualify the [[Definition:Warranty | warranties]] and [[Definition:Representation | representations]] made in the acquisition agreement. In insurance transactions — whether the target is a licensed [[Definition:Insurance carrier | carrier]], a [[Definition:Managing general agent (MGA) | managing general agent]], or a [[Definition:Third-party administrator (TPA) | TPA]] — the disclosure letter is the primary vehicle through which the seller protects itself from [[Definition:Warranty claim | warranty claims]] by ensuring the buyer is made aware of known issues before [[Definition:Completion | completion]].

📂 The letter is organized to mirror the warranty schedule of the [[Definition:Sale and purchase agreement (SPA) | SPA]], with each disclosure referenced to the specific warranty it qualifies. In an insurance context, the disclosures often cover a wide range of sector-specific matters: outstanding or threatened [[Definition:Litigation | litigation]] against the target, known [[Definition:Claims | claims]] reserve deficiencies, [[Definition:Regulatory authority | regulatory]] enforcement actions or supervisory letters, breaches of [[Definition:Solvency capital requirement (SCR) | solvency capital]] requirements, details of [[Definition:Reinsurance | reinsurance]] disputes, key employee departures, legacy [[Definition:Asbestos liability | asbestos]] or environmental exposures, and material deviations from [[Definition:Underwriting guidelines | underwriting guidelines]] on the in-force [[Definition:Book of business | book of business]]. The scope and detail of the disclosure letter is heavily negotiated: the buyer typically insists on specific, detailed disclosures rather than vague or blanket qualifications, while the seller aims for broad "general disclosures" that sweep in anything in the data room or public filings. The negotiation around the disclosure letter often runs in parallel with the [[Definition:Due diligence | due diligence]] process and can extend up to the moments before signing.

⚖️ Getting the disclosure letter right has material financial consequences in insurance [[Definition:Mergers and acquisitions (M&A) | M&A]]. A matter that is fairly disclosed in the letter generally cannot form the basis of a post-closing [[Definition:Warranty claim | warranty]] or [[Definition:Indemnity | indemnity]] claim by the buyer, so the letter effectively allocates risk between the parties for every known issue. For the buyer, gaps or ambiguities in the disclosures may be the basis for price adjustments, specific [[Definition:Indemnity | indemnities]], or even walking away from the deal. For the seller, incomplete or inaccurate disclosures can result in significant liability under the [[Definition:Sale and purchase agreement (SPA) | SPA]]. In cross-border insurance transactions, the interplay between the disclosure letter and [[Definition:Warranty and indemnity insurance (W&I insurance) | warranty and indemnity insurance]] is increasingly important: W&I insurers scrutinize the disclosure letter closely during their own [[Definition:Underwriting | underwriting]] process and may exclude inadequately disclosed matters from coverage.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Sale and purchase agreement (SPA)]]
* [[Definition:Warranty]]
* [[Definition:Indemnity]]
* [[Definition:Due diligence]]
* [[Definition:Warranty and indemnity insurance (W&I insurance)]]
* [[Definition:Representation]]
{{Div col end}}

Definition:Company disclosure letter - Revision history

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