The seller gets paid cleanly
With W&I, the responsibility for representations and warranties passes to the insurer. The seller limits their exposure to a symbolic amount and distributes the price without waiting years.
Empresas
Insurance due diligence and W&I insurance
At JORI& we know that the acquisition of a company can be a key moment for your business. For this reason, we help you make the leap in the safest way.
In short
What is insurance due diligence
Insurance due diligence analyses, within a corporate operation, what risks the target company has, which policies actually cover them, and what liabilities would remain with the buyer after closing. Its most visible product is the warranty and indemnity insurance (W&I), which transfers the seller's responsibility for breach of contract warranties to the insurer and allows operations to close that would otherwise be blocked in escrow negotiation.
Advantages
Advantages of insurance due diligence
The insurance piece of a corporate operation can affect price, schedule, and contract structure.
The escrow is released
Price retention is no longer necessary. That money immobilised for two or three years returns to the operation, and its financial cost usually exceeds the W&I premium.
Unblock stalled negotiations
When buyer and seller cannot agree on guarantees, transferring them to a solvent third party is often what allows a stalled operation to be signed.
Adjust the price with foundation
A quantified insurance liability is a negotiation argument with numbers, not an impression. It changes the conversation about valuation.
Profile
Who we work for
Funds and industrial buyers
Investors who need to quantify hidden insurance liabilities before setting a price.
Sellers
Shareholders seeking a clean exit, without prolonged price retentions or residual liability.
Legal and financial advisors
M&A teams needing the insurance piece integrated into the transaction schedule.
Family businesses in transition
Succession or partner entry processes where historical exposure is undocumented.
Technical criteria
What appears when reviewing the insurance history
In almost every reviewed transaction, we find at least one insurance liability that no one had quantified.
Claims made policies without retroactivity
The company changed insurer and a temporary gap was left. Claims for events during that period are not covered by anyone.
Change of control that voids the policy
Many policies, especially D&O, include a change of control clause that converts them into run-off upon closing the transaction.
Inherited underinsurance
The buyer acquires assets valued in the transaction far above the current insured amounts.
Open claims without provisioning
Ongoing files whose outcome directly affects the price and do not appear in the financial information.
Scope
What does insurance due diligence include
- Inventory and technical analysis of all policies of the target company
- Identification of gaps, underinsurance, and change of control clauses
- Review of historical claims and open files
- Structuring of warranty and indemnity insurance (W&I) for buyer or seller
- Specific contingency covers: identified tax, litigation, or environmental
- Design of the insurance programme for the day after closing
The definitive scope depends on the wording of each insurer. We review it with you before recommending anything.
The JORI& method
Cómo trabajamos
El mismo método en cualquier solución: entender la exposición real antes de mirar una prima.
Análisis del riesgo
Estudiamos la actividad, el patrimonio y los escenarios plausibles. Sin ese diagnóstico, comparar pólizas es comparar precios de cosas distintas.
Diseño del programa
Definimos coberturas, límites, franquicias y exclusiones aceptables. Decidimos qué se transfiere al asegurador y qué se retiene de forma consciente.
Negociación con el mercado
Presentamos el riesgo a las aseguradoras con las que trabajamos y negociamos condiciones. Somos independientes: no pertenecemos a ninguna compañía.
Acompañamiento y siniestros
Revisamos el programa cada renovación y, cuando ocurre el siniestro, actuamos como tu parte técnica frente al asegurador hasta el cobro.
Frequent doubts
Lo que más nos preguntan sobre insurance due diligence
What exactly is W&I insurance?
It is a policy that assumes liability arising from the breach of representations and warranties in the sale contract. It allows the seller to limit their liability to a symbolic amount and the buyer to retain a solvent recourse for several years, without relying on the seller's payment capacity.
How much does W&I cost?
The premium usually ranges between 0.8% and 1.5% of the contracted limit, with retentions varying by sector and size. In medium-sized transactions, it is common for its cost to be lower than the escrow it replaces, considering the financial cost of the retained money.
How long does the insurance due diligence take?
Between two and four weeks for a complete review, and less if there is an organised data room. The critical aspect is to start early: when the insurance piece is addressed in the last week, structuring options are lost that there is no longer time to negotiate.
Does W&I cover contingencies we already know?
No. Known and declared matters are excluded by definition, because W&I insures the unknown. For an identified risk, a specific contingency policy is structured, with its own premium and conditions.
Can W&I be contracted in small transactions?
The market has significantly lowered its entry threshold and today there is capacity for operations starting from a few million in company value. Below that, it is usually more efficient to work with well-drafted contractual guarantees and a reinforced insurance programme.
What happens to the company's policies after closing?
A decision must be made for each one whether to maintain it, integrate it into the buyer's programme, or put it into run-off. The D&O for outgoing directors almost always needs a six-year run-off, and forgetting it creates personal liability for those leaving the board.
Due Diligence
The insurance piece of your operation, before signing
Tell us what stage the process is at and what information you have available. We will tell you what can be reviewed in the remaining time and what W&I structure is viable.
- Independent broker: we do not belong to any insurer
- The specialist in the field you consulted answers you
- The review is delivered in writing, policy by policy
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