Warranty & Indemnity Insurance

Warranty & Indemnity (W&I) Insurance transfers the financial risk of seller warranty breaches from the seller to an insurer — the insurer pays indemnity claims directly to the buyer without recourse to the seller. It is increasingly used in Franco-Swiss M&A to facilitate clean exits (sellers distribute proceeds immediately at closing without escrow holdback) while giving buyers robust warranty coverage from a rated insurer. Its premium (typically 0.8–1.5% of insured coverage) is a transaction cost integrated in deal economics. W&I insurance requires a rigorous due diligence process — underwriters base their coverage on the buyer's due diligence findings.

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Example: in a CHF 30.0 million Franco-Swiss sale, the selling PE fund (seeking a clean exit) negotiates W&I Insurance covering 25% of the price (CHF 7.5 million) above a CHF 300,000 deductible. Premium: 1.1% = CHF 82,500. The buyer receives robust coverage from an A-rated insurer; the selling fund distributes CHF 30.0 million in full to its LPs at closing — with no escrow holdback and no post-distribution recourse risk.

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Hectelion advises on W&I Insurance eligibility and structuring in M&A mandates, coordinating with specialist brokers to optimise coverage and premium for buyers and sellers.