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.