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📝 '''Indicative offer letter''' is a preliminary, non-binding document submitted by a prospective acquirer expressing interest in purchasing an insurance company, [[Definition:Managing general agent (MGA) | MGA]], [[Definition:Book of business | book of business]], or other insurance asset, along with a proposed valuation range and key transaction terms. Often referred to as an indication of interest (IOI) or non-binding offer (NBO), this letter typically arrives after the buyer has reviewed an [[Definition:Information memorandum (IM) | information memorandum]] and initial data but before gaining access to a full [[Definition:Due diligence | due diligence]] data room. It serves as the buyer's ticket to the next phase of a structured sale process, signaling serious intent and providing the seller with enough detail to compare competing bids.

⚙️ A well-crafted indicative offer letter in an insurance context addresses several sector-specific dimensions beyond headline price. It outlines the buyer's view on key actuarial assumptions — particularly the treatment of [[Definition:Loss reserve | reserves]] and any anticipated [[Definition:Purchase price adjustment | purchase price adjustments]] tied to [[Definition:Reserve development | reserve development]] — and indicates whether the proposed valuation is based on embedded value, a multiple of [[Definition:Gross written premium (GWP) | gross written premium]], book value, or another metric. The letter also addresses regulatory considerations, including the buyer's plan for obtaining [[Definition:Change of control approval | change-of-control approvals]] from insurance regulators, anticipated timelines, and any conditions precedent such as securing [[Definition:Reinsurance | reinsurance]] or [[Definition:Financing | financing]]. Buyers frequently note their willingness (or lack thereof) to provide [[Definition:Indemnity cap | indemnity]] protections and describe the team and resources they will deploy for confirmatory due diligence.

💡 For sellers — whether they are insurance groups divesting non-core units, [[Definition:Private equity | private equity]] sponsors exiting portfolio companies, or founders looking to monetize an [[Definition:Insurtech | insurtech]] platform — the indicative offer letter is the primary tool for sorting serious contenders from window-shoppers. Investment bankers running the process use these letters to create a shortlist of bidders who advance to detailed [[Definition:Due diligence | due diligence]] and management presentations. Because the letter is non-binding, its value lies not in legal enforceability but in the credibility of its terms: buyers who propose unrealistic valuations, vague regulatory strategies, or excessive conditionality risk being eliminated. In insurance M&A, where regulatory approval timelines can stretch for months and [[Definition:Actuarial due diligence | actuarial complexity]] adds layers of negotiation, a clear and well-informed indicative offer letter accelerates the process and sets the tone for the relationship between buyer and seller throughout the transaction.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Information memorandum (IM)]]
* [[Definition:Due diligence]]
* [[Definition:Letter of intent (LOI)]]
* [[Definition:Non-binding offer (NBO)]]
* [[Definition:Mergers and acquisitions (M&A)]]
* [[Definition:Change of control approval]]
{{Div col end}}

Definition:Indicative offer letter - Revision history

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