Mergers and Acquisitions

Litigation Buyout Insurance (LBI) is a tailored insurance product from AIG Europe’s M&A team that quarantines a client from the uncertainties inherent in outstanding litigation whether those uncertainties relate to the outcome or to the eventual amount of damages awarded. LBI will either cap an insured’s financial exposure or remove it altogether and will be designed to meet the particular needs of the insured and the specific characteristics of the dispute.

LBI enables clients to ring-fence liabilities which may arise from any current or anticipated litigation, arbitration or other dispute. This may be particular useful in an M&A context where an unresolved dispute would otherwise prevent an acquisition proceeding or would have a significant impact on the purchase price. An LBI policy can transform the inherently uncertain liability of litigation into a quantifiable insurance cost which can enable the parties to the transaction to focus on the business being acquired.

Underwriting and cover are tailored to each case, allowing the policy to be adapted to a dispute, regardless of its subject matter. As such, LBI can be adapted to cover proceedings ranging from a simple breach of a supply contract, a more complicated employment issue through to highly complex securities litigation and intellectual property disputes.

Market

Any company considering a merger or acquisition or companies with large, identified contingent liabilities.

Features & Benefits

• Transfers an uncertain liability from the insured to the insurer.
• Transforms contingent and inherently uncertain claims into a quantifiable insurance cost allowing for balance sheet certainty.
• Caps future financial risk for the insured.
• Releases business opportunities previously blocked by claims or disputes.
• Eliminates potential obstacles to successful M&A transactions.
• May enable favourable public disclosures, subject to the insurer’s agreement..

Cover

• Settlement costs.
• Legal costs.
• Experts’ costs.
• Damages.
• Other potential liabilities arising in the context of a particular dispute..

Through our partnership with Shariah-compliant managing general agent Cobalt Underwriting, we offer a range of market-leading Islamic insurance solutions for M&A transactions. Whether insuring the buy or sell side, we work with clients to understand, measure and mitigate transactional risks, helping to reduce uncertainty and close deals quickly.

Whether a requirement from your finance provider or a key part of your investment criteria, we provide Sharia-compliant M&A insurance policies, reviewed and certified by a certified Shariah scholar in consultation with their Shariah supervisory board.

We offer three main Islamic M&A products, with limits of up to US$30 million per policy available:

W&I Insurance

• This tailored coverage helps protect buyers and sellers from financial losses if misrepresentations or inaccuracies in representations or warranties occur. Buyers can distinguish bids, sellers can reduce indemnity obligations – and both can close more efficiently.

Contingent Liability Insurance

• Helps reduce or eliminate exposures relating to the business of the seller or buyer arising out of a merger or acquisition, thereby enabling deals to close more quickly – and sales proceeds to avoid impairment.

Tax Liability Insurance

• This cover helps reduce or eliminate financial losses arising from a tax authority’s successful challenge of your tax treatment during a transaction, which could lead to a material reassessment of your tax liability and include fines and penalties.

These products are issued by AIG, having been approved as Shariah-compliant by Cobalt.