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✉️ '''Letter of intent (insurance M&A)''' is a preliminary, typically non-binding document in which a prospective buyer outlines the key terms under which it proposes to acquire an [[Definition:Insurance carrier | insurance company]], a [[Definition:Book of business | book of business]], or another insurance-related enterprise. Often referred to as an LOI or term sheet, it establishes the framework for negotiation — covering proposed purchase price or valuation methodology, deal structure, [[Definition:Due diligence (insurance) | due diligence]] scope, exclusivity period, and anticipated [[Definition:Insurance regulator | regulatory]] approvals — before the parties invest the substantial time and cost required to produce a [[Definition:Definitive agreement (insurance M&A) | definitive agreement]].

📐 Although most provisions in an insurance LOI are expressly non-binding, certain clauses carry legal force. Exclusivity provisions prevent the seller from soliciting or entertaining competing offers during a specified window, giving the buyer space to conduct thorough [[Definition:Actuarial analysis | actuarial]], financial, and regulatory diligence. [[Definition:Confidentiality agreement (insurance M&A) | Confidentiality]] obligations — whether embedded in the LOI or referenced via a separate agreement — protect the sensitive [[Definition:Policyholder | policyholder]] data, [[Definition:Loss reserve | reserve]] information, and [[Definition:Reinsurance treaty | reinsurance treaty]] details that the seller will share in the [[Definition:Data room (insurance M&A) | data room]]. The LOI will also typically signal the buyer's intended approach to key insurance-specific issues: whether the deal is structured as a [[Definition:Stock purchase agreement (insurance) | stock purchase]] or [[Definition:Asset purchase agreement (insurance) | asset purchase]], how [[Definition:Incurred but not reported (IBNR) | IBNR]] liabilities will be addressed, and whether a reserve true-up mechanism is expected.

🚦 Issuing a well-crafted LOI is strategically important because it aligns expectations early and reduces the risk of a costly breakdown deep into negotiations. In competitive auction processes — common when [[Definition:Private equity | private equity]] firms or [[Definition:Legacy insurance carrier | legacy acquirers]] bid for [[Definition:Run-off | run-off]] portfolios — the quality and specificity of the LOI can determine whether a bidder advances to the next round. Sellers use it to gauge not only price but also the buyer's sophistication around [[Definition:Insurance regulation | regulatory]] hurdles, [[Definition:Capital | capital]] adequacy requirements, and transition logistics. While the LOI does not guarantee a deal will close, it sets the trajectory for every subsequent negotiation and drafting session.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Definitive agreement (insurance M&A)]]
* [[Definition:Confidentiality agreement (insurance M&A)]]
* [[Definition:Data room (insurance M&A)]]
* [[Definition:Due diligence (insurance)]]
* [[Definition:Exclusivity agreement]]
* [[Definition:Stock purchase agreement (insurance)]]
{{Div col end}}

Definition:Letter of intent (insurance M&A) - Revision history

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