The New Standard in M&A: How Insurance is Changing the Game

Nevertheless, certain aspects do require careful consideration during the negotiation phase. These policies typically come with limitations and exclusions. Common exclusions include fraud, known matters, risks discovered during due diligence, and Anti-Bribery and Anti-Corruption (ABAC) exclusions etc. Since known matters and specific indemnities, especially those arising from the due diligence exercise, are also typically excluded, these become the subject matter of discussions and negotiations between the buyer and the seller as to how these issues will be addressed. The insurance policies also contain de minimis and retention amounts, requiring the insured to assume a certain level of risk. There are also monetary caps and time period limitations for making claims under the policies. Despite specific exclusions and limitations, they are clear and manageable, providing coverage for crucial unknown risks. In terms of the claim process, the insured is required to cooperate with underwriters, who actively participate in the defence process. The insured cannot settle claims without the underwriter’s consent. All these requirements underscore the importance of carefully understanding and negotiating the terms and conditions of the insurance policies.