What is W&I (warranty & indemnity) insurance, and what role does it play in deals?
W&I (warranty & indemnity) insurance covers breaches of warranties and indemnities under the sale agreement (SPA). Usually the buyer takes out the policy and pays the premium. Coverage is typically 10–20% of EV.
Why so popular? More than 60% of PE deals now use W&I. The seller gets a "clean exit" with no hold-backs; the buyer has an insured claim instead of seller recourse. It is especially popular with family sellers — no years of post-closing dispute risk.
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| Aspect | Buyer's-side | Seller's-side |
|---|---|---|
| Policyholder | buyer | seller |
| Frequency | >60% of PE deals | rarer |
| Premium | 0.6–1.5% of coverage | – |
| Deductible | 0.5–1.0% of EV | – |
| Item | Value |
|---|---|
| Deal EV | $200m |
| Coverage | $30m (15% of EV) |
| Deductible | $1m (0.5% of EV) |
| Premium | $350,000 (1.2% of coverage) |
| Coverage period | 18–36 months general, 7 years tax |
known matters (buyer awareness during DD), pre-closing pensions, environmental liabilities (separate cover possible), sanctions / FCPA.
Question: "Why is W&I so popular?"
Answer: "Three reasons: a clean exit for sponsor sellers — no hold-backs, no indemnity risk. Auction competition — a buyer can bid more aggressively with a lower indemnity cap. And the mid-market has a high family-owner share, and families often dislike classic indemnity structures. W&I solves all three."