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🤝 '''Share purchase agreement''' is a contract through which a buyer acquires some or all of the outstanding shares of an insurance or reinsurance company — or, in the broader [[Definition:Insurtech | insurtech]] ecosystem, of an [[Definition:Managing general agent (MGA) | MGA]], [[Definition:Third-party administrator (TPA) | TPA]], or technology vendor — from the existing shareholders. In the insurance industry, share purchase agreements (SPAs) are the dominant legal mechanism for transferring ownership of regulated entities because, unlike asset deals, they preserve the target's [[Definition:Insurance license | insurance licenses]], [[Definition:Reinsurance | reinsurance treaties]], [[Definition:Policy | in-force policy]] obligations, and regulatory capital structure intact. This structural continuity is especially valuable in highly regulated sectors where re-licensing or novation of thousands of policies would be prohibitively complex.

⚙️ The mechanics of an insurance-sector SPA extend well beyond standard M&A provisions. Because the target carries [[Definition:Reserve | reserves]], [[Definition:Policyholder | policyholder]] liabilities, and [[Definition:Capital requirement | regulatory capital requirements]], the SPA typically includes detailed completion-accounts or locked-box mechanisms tied to [[Definition:Net asset value (NAV) | net asset value]] or [[Definition:Embedded value | embedded value]]. Representations and warranties address insurance-specific risks: the adequacy of [[Definition:Loss reserve | loss reserves]], the status of [[Definition:Reinsurance recoverables | reinsurance recoverables]], compliance with [[Definition:Solvency II | Solvency II]] or equivalent [[Definition:Solvency | solvency]] regimes, and the absence of undisclosed [[Definition:Claim | claims]] or regulatory actions. Conditions precedent almost always include obtaining change-of-control approvals from insurance regulators — such as state insurance departments in the United States, the [[Definition:Prudential Regulation Authority (PRA) | PRA]] in the United Kingdom, or the [[Definition:China Banking and Insurance Regulatory Commission (CBIRC) | CBIRC]] in China — each of which evaluates the buyer's fitness, financial strength, and plans for the target. The timeline from signing to closing can therefore stretch considerably compared to unregulated transactions.

📌 Getting the SPA right is critical because insurance acquisitions expose buyers to long-tail liabilities that may not fully manifest for years or even decades, particularly in lines such as [[Definition:Asbestos liability | asbestos]], [[Definition:Environmental liability | environmental]], or [[Definition:Directors and officers liability insurance (D&O) | D&O]] coverage. Indemnity clauses, [[Definition:Warranty and indemnity insurance (W&I) | warranty-and-indemnity insurance]], and [[Definition:Loss portfolio transfer (LPT) | loss-portfolio-transfer]] side agreements are frequently layered alongside the SPA to allocate historical reserve risk between buyer and seller. [[Definition:Private equity | Private-equity]] firms, which have become major acquirers of insurance platforms, invest heavily in actuarial [[Definition:Due diligence | due diligence]] before finalizing SPA terms, knowing that mispriced reserves translate directly into post-closing balance-sheet surprises. A carefully structured SPA thus serves as the commercial and legal backbone of insurance M&A, aligning the interests of shareholders, regulators, and the policyholders whose coverage the transaction ultimately affects.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Mergers and acquisitions (M&A)]]
* [[Definition:Due diligence]]
* [[Definition:Change of control]]
* [[Definition:Warranty and indemnity insurance (W&I)]]
* [[Definition:Loss portfolio transfer (LPT)]]
* [[Definition:Embedded value]]
{{Div col end}}

Definition:Share purchase agreement - Revision history

PlumBot: Bot: Creating new article from JSON