Contingent risk insurance

Contingent risk insurance is a policy that transfers to an insurer a specific, known and quantified risk affecting a company, most often a pending or latent tax or legal dispute. Unlike W&I insurance, which covers unknown breaches of warranties, it targets a risk already identified in due diligence.

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It allows a deal-blocking point to be ring-fenced: rather than cutting the price or locking a large amount in escrow, the parties transfer the risk to an insurer, which unblocks the closing. Its use is spreading in the mid-market in 2026.

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Example: a Swiss target faces a potential tax reassessment estimated at CHF 1.5 million. Rather than locking that amount in escrow, the parties take out contingent risk insurance covering the possible reassessment, letting the buyer pay the full price and the seller receive the entire proceeds.

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At Hectelion, we identify ring-fenceable risks in due diligence and assess the merits of contingent risk insurance to secure the closing.