Warranty and Indemnity (W&I) Insurance

Definition

A specialist insurance product used in M&A transactions that covers the buyer against financial losses arising from breaches of the seller's warranties and representations in the sale and purchase agreement. W&I insurance has become standard in European PE transactions, enabling cleaner exits (as the seller's liability is capped or eliminated), facilitating auction processes, and allowing PE funds to distribute sale proceeds to LPs without retaining escrow reserves. Premiums typically range from 1-3% of the policy limit.