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📄 '''Vendor due diligence report (VDD report)''' is the formal written deliverable produced at the conclusion of a [[Definition:Vendor due diligence (VDD) | vendor due diligence]] process, consolidating the independent findings of advisors engaged by the seller of an insurance business into a single, structured document that prospective buyers can rely upon when formulating their bids. In insurance [[Definition:Mergers and acquisitions (M&A) | M&A]], the VDD report serves as the analytical backbone of a sell-side process, covering financial performance, [[Definition:Actuarial analysis | actuarial]] reserve opinions, [[Definition:Underwriting performance | underwriting quality]], [[Definition:Reinsurance | reinsurance]] arrangements, regulatory standing, and — increasingly — technology and data infrastructure assessments.

⚙️ The report is structured to mirror the due diligence that a sophisticated buyer would conduct independently, organized into clearly delineated sections. A typical insurance VDD report opens with an executive summary, then moves through quality of [[Definition:Earnings | earnings]] analysis (identifying non-recurring items, normalizing for [[Definition:Catastrophe loss | catastrophe losses]] or [[Definition:Reserve release | reserve releases]]), a detailed review of [[Definition:Loss reserve | reserves]] including independent [[Definition:Actuarial analysis | actuarial]] projections and [[Definition:Loss triangle | loss triangle]] analysis, assessment of the [[Definition:Unearned premium reserve (UPR) | unearned premium reserve]], evaluation of [[Definition:Distribution | distribution]] agreements and key carrier or [[Definition:Binding authority agreement | binding authority]] relationships, and a review of [[Definition:Regulatory capital | capital]] adequacy under the applicable framework — be it [[Definition:Solvency II | Solvency II]], [[Definition:Risk-based capital (RBC) | RBC]], or another regime. The report explicitly states assumptions, flags areas of uncertainty, and often includes sensitivity analyses showing how key metrics shift under alternative scenarios. Buyers receive the report under a reliance letter, which defines the legal basis on which they can depend on its contents, though most buyers still commission their own confirmatory work on high-risk areas.

💡 A well-crafted VDD report can materially improve transaction outcomes for the seller. By presenting a single, authoritative analytical narrative to all bidders, it levels the information playing field and reduces the scope for opportunistic price reductions based on selectively interpreted data. For insurance-specific transactions, the credibility of the actuarial sections is paramount — a reserve opinion from a respected independent [[Definition:Actuary | actuary]] embedded in the VDD report can preempt the most common source of bid-ask spread disagreements. The report also becomes a reference document during post-signing [[Definition:Purchase price adjustment | purchase price adjustment]] negotiations and, in some cases, during [[Definition:Warranty and indemnity insurance | warranty and indemnity insurance]] underwriting, where the insurer of the W&I policy relies on the VDD report to assess disclosure quality. In competitive processes for [[Definition:Managing general agent (MGA) | MGAs]] and [[Definition:Insurtech | insurtech]] platforms, where multiple [[Definition:Private equity | private equity]] bidders are vying for the same asset, the speed and transparency enabled by a comprehensive VDD report can determine whether the seller achieves its target valuation.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Vendor due diligence (VDD)]]
* [[Definition:Vendor assist report]]
* [[Definition:Valuation report]]
* [[Definition:Due diligence]]
* [[Definition:Warranty and indemnity insurance]]
* [[Definition:Actuarial analysis]]
{{Div col end}}

Definition:Vendor due diligence report (VDD report) - Revision history

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