How Howden restructured a transactional insurance program

How Howden restructured a transactional insurance program offered by the counterparty into something stronger: broader, more reliable cover with better peace of mind, at no extra cost.  

The client

An Asian company set about acquiring a pan-European property/logistics company. It was a huge, multibillion dollar deal and of course, the buyer was a little nervous.  Having gotten a quote elsewhere for Warranty and Indemnity (W&I) cover, the buyer approached Howden for a second opinion. 

Our experienced M&A team got to work combing through the transaction. We studied the due diligence, and saw some potentially costly gaps in the insurance deal they’d be offered as well as a potential way to lower the premiums for the W&I policy.  

Further risks were readily apparent from the due diligence materials and the transaction structure that would not be covered under the proposed W&I policy. 

Howden proposed a solution that broke up the premium spend, putting it towards 4 separate policy types and managed to package in all the policies for no additional costs, owing to the savings gained from remarketing the W&I portion. 

The first, W&I provided cover for the usual warranties under the sales and purchase agreement, including several challenging warranties that the competing W&I left exposed.  But W&I insurance has its limitations and wasn’t sufficient for a deal of this scope and nature. 

In addition, we pinpointed and secured cover for the following 3 known and unknown risks: 

1. Title 

Combing the due diligence revealed some missing share certificates and transfer deeds, as well as some breaches of planning permission. We created specific policy terms to account for this.  

2. Tax

We identified two tax risks that needed standalone cover: one relating to a German-specific tax law (RETT), another concerning Capital Gains Tax (CGT) and Withholding Tax (WHT) from a previous refinancing of the selling organisation. 

Two tax specific policies offered protection for all three risks. 

3. Environmental 

While no environmental risks stood out in the information provided, chances of a retroactive claim can often be a worry, especially when underground storage tanks are involved. We were able to source cover for unknown environmental risks, including cover for underground storage tanks. 
 

Results

This restructuring of the buyer’s protection into 4 policy types delivered broader cover that gave immeasurably better peace of mind to the company’s directors and shareholders.  

All this was achieved within the transaction timeframe prior to signing, at zero extra cost to the client's budget. 

Better cover at cost-effective prices. That’s the Howden way.