• S.D.

How customers, advisors and brokers will benefit from digital W&I insurance

Warranty & Indemnity (W&I) insurance offers buyers and sellers the opportunity to insure contractual obligations and related warranties and indemnities in transactions. W&I insurance has existed in the American and British insurance markets since the 1980s. Especially in the area of corporate and real estate transactions, W&I insurance is also becoming increasingly popular in continental Europe. Especially in transactions exceeding a purchase price of 100 million or when private equities are involved, W&I insurance is used.

W&I insurance is usually only considered for high-volume transactions

There are several reasons why W&I policies are usually only requested for larger transactions:

  • W&I underwriting is complex and delays the already tightly scheduled timetable of a transaction

  • Only those components can be insured for which due diligence has been carried out beforehand

  • Premiums are comparatively high due to the high underwriting costs involved

  • High claims frequency, especially within the first year after completion of the transaction

  • Intransparent market for intermediaries who do not regularly deal with W&I environment

Digitization creates opportunities for insurers, intermediaries and customers

In the future, standardized workflows and artificial intelligence will enable insurers to save a large part of the previous effort in underwriting, so that the minimum premiums of a transaction will be significantly lower. As a result of this development, W&I will also become a relevant product for medium-sized intermediaries and their customers, for example in corporate succession.

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