Warranties and Indemnity Insurance Policy
- Warranty and Indemnity insurance responds to cover financial losses arising from breaches of the warranties, and in certain jurisdictions tax indemnities, provided to facilitate a variety of corporate transactions, especially mergers and acquisitions.
- A buyer policy indemnifies buyers for losses caused by breaches of warranties given by the seller in the SPA (Sale & Purchase Agreement). It enables the buyer to claim directly from the insurer without first having to pursue the seller.
- A seller policy indemnifies sellers for losses resulting from claims made by the buyer for breaches of the warranties given in the SPA (Sale & Purchase Agreement).
- The breaches are exemplified as under –
- Financial statement misrepresentations account for bulk of the breaches – most commonly alleged breaches were for financial statements, tax information, and compliance with laws.
- There are other kind of breaches – breaches of intellectual property, trademarks, copy rights, data, etc. – mostly in advanced economies
- Whereas, other economies reported more breaches of contracts