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🤝 '''Warranty and indemnity insurance''' (commonly known as W&I insurance or, in the United States, [[Definition:Representations and warranties insurance | representations and warranties insurance]]) is a transactional [[Definition:Insurance policy | insurance product]] that covers financial losses arising from breaches of the warranties and indemnities given by the seller in a mergers-and-acquisitions (M&A) purchase agreement. Within the insurance industry, W&I coverage plays a prominent role in acquisitions of [[Definition:Insurance carrier | insurance carriers]], [[Definition:Managing general agent (MGA) | MGAs]], [[Definition:Insurance broker | brokerages]], and [[Definition:Insurtech | insurtech]] firms, where buyers seek protection against undisclosed liabilities such as [[Definition:Loss reserve | reserve inadequacy]], regulatory non-compliance, or misrepresented [[Definition:Underwriting | underwriting]] performance.

⚙️ A W&I policy attaches to a specific transaction and can be structured as a buy-side or sell-side policy, though buy-side placements dominate the market because they allow the buyer to claim directly against the insurer rather than pursuing the seller post-closing. The [[Definition:Underwriter | underwriter]] conducts a thorough review of the purchase agreement, [[Definition:Due diligence | due diligence]] reports, financial statements, and disclosure schedules to assess the quality of the deal process and identify areas of heightened risk. The policy mirrors the warranty schedule in the purchase agreement, with certain exclusions for known issues, fraud, forward-looking statements, and sometimes specific items flagged during [[Definition:Due diligence | due diligence]]. [[Definition:Premium | Premiums]] typically run between one and three percent of the policy [[Definition:Policy limit | limit]], with [[Definition:Retention | retentions]] (deductibles) that decrease over the policy term.

📊 The rapid expansion of the W&I market has reshaped deal dynamics across the insurance sector and beyond. Sellers — including [[Definition:Private equity | private equity]] sponsors exiting insurance platform investments — benefit from cleaner exits with reduced [[Definition:Escrow | escrow]] holdbacks, while buyers gain certainty that a creditworthy insurer stands behind the seller's representations. For [[Definition:Insurance carrier | carriers]] underwriting W&I policies, the line demands deep transactional expertise and rigorous [[Definition:Risk assessment | risk assessment]], because a single large claim — say, from a materially under-reserved book of [[Definition:Casualty insurance | casualty]] business — can be substantial. The product's growth has also spurred the emergence of specialized [[Definition:Managing general agent (MGA) | MGAs]] and [[Definition:Insurtech | insurtech]] platforms that streamline the quoting and binding process, reducing turnaround times from weeks to days.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Representations and warranties insurance]]
* [[Definition:Transactional risk insurance]]
* [[Definition:Due diligence]]
* [[Definition:Mergers and acquisitions (M&A)]]
* [[Definition:Private equity]]
* [[Definition:Tax liability insurance]]
{{Div col end}}

Definition:Warranty and indemnity insurance - Revision history

PlumBot: Bot: Creating new article from JSON