Warranty and Indemnity (W&I) Insurance (in the U.S. called “Representation and Warranty Insurance” or “R&W Insurance”) is a commercial insurance product that covers losses arising from breaches of representations and warranties (and certain indemnification claims) in M&A transactions. W&I insurance has fundamentally restructured the post-2015 M&A market: replacing or substantially reducing traditional seller-funded indemnification escrows and shifting breach-risk from sellers to specialized insurance carriers.
Two principal W&I policy structures exist: buy-side policies (the dominant structure, ~85% of policies; the buyer is the insured, claims are filed by buyer against insurer, and seller liability is contractually limited to a low fundamental-rep cap or a deductible-only structure); and sell-side policies (less common; seller is insured, intended to protect against unknown liabilities surfacing post-close, often used in carve-out or distressed deals).
Standard W&I policy economics include: premium (typically 2–4% of coverage limit, paid as a one-time payment at policy binding); coverage limit (typically 10–30% of deal value, with most U.S. deals binding at 15% of EV); retention (deductible) (typically 0.5–1% of EV, sometimes “no retention” structures); survival (3 years for general reps, 6 years or statutory limit for tax/fundamental); and policy exclusions (purchase-price adjustment, forward-looking statements, breach of covenants, intentional fraud, known issues, and underwriter-specific exclusions surfaced during diligence).
The strategic benefits of W&I are substantial: cleaner exit for sellers (no protracted indemnification escrow, immediate liquidity for all proceeds, no clawback risk); extended protection for buyers (typically 3-year general survival vs. 12–18 month seller indemnification); deal-process acceleration (W&I underwriting can run in parallel with due diligence, replacing seller-cap negotiation tension); and private-equity exit optimization (PE sellers can distribute all proceeds to LPs at close, avoiding fund-level liabilities).
For Turkish founders selling to international PE or strategic acquirers, W&I has become increasingly common, with leading carriers (AIG, Beazley, Liberty Mutual, Chubb, Hiscox, Tokio Marine HCC, Euclid) underwriting Turkey-linked transactions. Strategic considerations include: insurer selection (Turkey-experienced underwriters reduce premium and exclusion risk), broker engagement (Marsh, Aon, Willis Towers Watson, Lockton dominate; specialized boutiques offer mid-market alternatives), diligence-process coordination (insurer due diligence runs alongside buyer DD), and the integration of W&I limits with seller residual liability and escrow structures. Vircon Legal advises sellers and buyers on W&I strategy — placement-process management, carrier and broker selection, policy-term negotiation, exclusion-management strategy, and the alignment of W&I with overall M&A risk-allocation architecture.