What is warranty and indemnity (W&I) insurance in Dutch M&A?

Dutch term: Warranty & indemnity verzekering | Legal basis: Insurance market practice

Warranty and indemnity (W&I) insurance in Dutch M&A transactions is a policy that covers losses arising from breaches of representations and warranties in the share purchase agreement. The policy can be taken out by either the buyer (buy-side policy, most common) or the seller (sell-side policy).

W&I insurance allows the seller to make a clean exit without retaining liability for warranty claims, while giving the buyer recourse to a solvent insurer rather than to the seller. Premiums are typically 1-2% of the policy limit. Standard exclusions include known issues, fraud, forward-looking warranties, environmental liabilities and certain regulatory matters. The Dutch W&I insurance market has matured significantly and is now available for mid-market as well as large transactions.

Why it matters for international businesses

For international M&A transactions involving Dutch targets, W&I insurance has become a standard deal tool that facilitates completion and reduces post-closing friction between buyer and seller.