Contingent Risk Insurance

Contingent Risk Insurance provides cover to offset the risks associated with specific and identified contingent liabilities that are capable of legal and/or accounting analysis. While Warranty and Indemnity (W&I) and Representations and Warranty (R&W) insurance is there to cover unknown risks, Contingent Risk Insurance is there to cover certain known matters.

Contingent Risk Insurance can be used in the context of an M&A transaction and also for other investments, restructurings or financing transactions. It offers insurance for a broad range of contingent risks for which neither party is willing to stand behind. The insurance transfers a known or uncertain contingent liability from a company’s balance sheet to an insurance company.

Such insurance can be put in place prior to a transaction process to isolate risks in portfolio companies that can thereby allow sellers to address issues before commencing a sale process and present a buyer with a prepared solution. Alternatively, it can be used as part of an ongoing transaction process when an issue has been identified as part of the due diligence exercise. They can also be used for stand-alone risks with no connection to a transaction as part of a prudent risk management strategy.

Contingent Risk Insurance is tailored to the specific circumstances of the risk in question and typically offers coverage for risks such as:

  • Legal interpretation risk
  • Pension associated risks
  • Shareholder disputes
  • TUPE disputes
  • Specific accounting treatment
  • Environmental risks
  • Regulatory exposures

Any party to the risk (provided they can show they have an insurable interest) can be insured. Sellers often purchase coverage in order to ring fence the risk in question. Buyers also look to take out these policies in the event they would be the party suffering the loss if the contingent risk arose. Other parties such as lenders, liquidators and investors may also require protection to protect their interests.

Putting in place a Contingent Risk Insurance policy requires a formal risk analysis, and for those matters with a more specific legal interpretation, then a legal opinion from a reputable law firm with expertise in the subject matter of the risk in question which:

1. Sets out the factual background and the commercial rationale to insure the risk;

2. Analyses the applicable law and/or regulation;

3. Analyses and quantifies the loss that may be suffered should the risk crystallise: and

4. Provides a conclusion as to the likelihood of the risk crystallising.

Contingent risks are typically low in probability but can have significant damaging consequences for a business. Given this there is a wide disparity when it comes to pricing which is determined by insurer appetite, severity, jurisdictions involved and complexity. Premium rates historically can typically vary between 4-15% the policy limit.

Pawar Tan

Tan Pawar

Head of Private Equity and M&A

T: +44 (0)20-7480-0264
M: +44 (0)7341-133-007
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Andrews Dean

Dean Andrews

Head of Tax Liability Insurance

T: +44 (0)20-7480-0308
M: +44 (0)7876-815-643
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Wallace Sophie

Sophie Wallace

Divisional Director

T: +44 (0)20-7480-0378
M: +44 (0)7824-605-613
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Leitch Harry

Harry Leitch

Director, Head of Deal Origination

T: +44 (0)20-7480-0346
M: +44 (0)7770-990-368
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Kemp Simon

Simon Kemp

Group General Counsel

T: +44 (0)20-7480-7288
M: +44 (0)7825-844-988
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Marcus Christie

Associate

T: +44 (0)20-7374-5937
M: +44 (0)7826-532-908
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Simon stephan

Stephan Simon

Head of W&I Insurance – UK

M: +44(0)7785-720-944
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Kanwar Chandini

Chandini Kanwar

Associate Director

T: +44 (0)20 7374 5990
M: +44 (0)7825 421 394
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UK

One America Square
London EC3N 2LS
United Kingdom

T: +44 (0)20-7480-7288

Stone Jason

Jason Stone

Managing Director, Canada

M: +1 416-845-4572
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Allen logan

Logan Allen

Associate

M: +1 416-722-8171
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Toronto

1 University Ave,
Toronto, ON M5J 2P1

Lee Sandra

Sandra Lee

CEO & Head of PEMAT, Asia

T: +852 3579 5485
M: +852 9255 7088
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De Lange Martijn

Martijn de Lange

Managing Director

T: +852 3579 5486
M: +852 9772 9951
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Wong Aris

Aris Wong

Managing Director

M: +65 8321 6236
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Sagar Mehta

Associate Director

M: +65 8010 2687
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Swee Faith

Faith Swee

Senior Associate

M: +65 8949 3439
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Jessica Xi

Senior Associate

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M: +852 6713 1883
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Ryan Heng

Senior Associate

M: +65 8792 6334
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Yongtak Lee

Yongtak Lee

CEO & Managing Director

T: +82 2 6405 1021
M: +82 10 3110 2807
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Kim Tamara

Tamara Kim

Chief Legal Officer & Senior Director

M: +82 10 7365 4628
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Kaylee Kim

Associate

T: +82 2 6405 1021
M: +82 10 7106 1709
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Cha Chloe

Chloe Cha

Senior Associate

T: +82 2 6405 1021
M: +82 10 7164 7071
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Jayasundara Nelumi

Nelumi Jayasundara

Associate

M: +852 9801 3916
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Cho Wooyoung

Wooyoung Cho

Junior Associate

T: +82 2 6405 1021
M: +82 10 7120 1827
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Singapore

138 Market Street #05-01,
CapitaGreen,
Singapore 048946

T: +65 9384 6484

Hong Kong

4/F, Lee Garden Three,
1 Sunning Road,
Causeway Bay, Hong Kong

Seoul

#1908 19Fl., S Tower Bldg.,
82 Saemunan-ro, Jongno-gu,
Seoul, South Korea

T: +82 2-723-1800

Godden Andrew

Andrew Godden

Chief Executive Officer - Australia

T: +61 (2) 9165-3502
M: +61 (0) 432-805-729
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Sydney

Level 3,
222 Clarence Street,
Sydney NSW 2000

T: +61 (2) 9165-3500

Claro Fernando

Fernando Claro

Chief Executive Officer, Iberia

T: +34 91-419-76-30
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Madrid

c/ Serrano, 240. Planta 5
28016 Madrid

T: +34 91-419-76-40

Astorqui Jose

Jose H. Astorqui

CCO, Latin America & Caribbean

T: +1 786-581-1899
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Miami (US)

800 Brickell Avenue
Suite 350, Miami, Florida 33131

T: +1 786-581-1896