Taking No Chances

Regardless of the industry, the allocation of risk for post-closing contingencies or unknown liabilities is one of the most heavily negotiated issues in mergers and acquisitions (M&A). And when it comes to insurance M&A transactions, certain market practices, approaches and issues are unique...

Full description

Saved in:
Bibliographic Details
Published inBest's Review Vol. 110; no. 4; p. 97
Main Authors Devins, Michael D, Grosgold, David
Format Trade Publication Article
LanguageEnglish
Published Oldwick A.M. Best Company 01.08.2009
Subjects
Acquisitions & mergers
Agreements
Contingent liabilities
Indemnity
Insurance industry
Insurance policies
Materiality
Reinsurance
Risk assessment
Sales
Warranties
United States > US
Online AccessGet full text

Cover

More Information
Summary:Regardless of the industry, the allocation of risk for post-closing contingencies or unknown liabilities is one of the most heavily negotiated issues in mergers and acquisitions (M&A). And when it comes to insurance M&A transactions, certain market practices, approaches and issues are unique to to the industry, and various post-closing risk allocation mechanisms have become common. The structure of a deal is the most basic risk allocation mechanism in M&A transactions. The risk of loss for contingent and unknown liabilities is allocated differently by operation of law if the transaction is structured as a stock acquisition, a merger or a sale of assets of the target entity. Coupled with the indemnity provisions in the acquisitions and warranties have a risk allocation function. In most circumstances, representations and warranties are meant to provide protection against unknown risks. Known liabilities are usually excluded from their coverage and accounted for in the purchase price.
ISSN:1527-5914
2161-282X