Insurance Due Diligence Reports

Insurance Due Diligence

Who on your deal team is protecting you from insurance program gaps or identifying possible synergies on your mergers and acquisition team? No one wants surprises after a deal closes, specifically the kind that results in a major financial loss not covered by the appropriate insurance.

Whether you’re a private equity firm growing your portfolio or a strategic buyer seeking to gain more market share, we can help you analyze the insurance & risk management programs and document an executive summary highlighting potential gaps, solutions, cost savings, and other considerations based on your risk profile and the current business climate. The reality is that it can be difficult to include a complete pre-close insurance review in such a competitive and compressed deal process. But Reliance Insurance has performed fast paced due diligence work across a broad range of industries for high profile private equity buyers from the US and Europe, as well as local Canadian buyers in need of due diligence analysis and reports expertise on their deal team.

Key insurance due diligence after signing a Letter of Intent

Directors & Officers liability

It is important to purchase a policy to protect your D’s & O’s from claims that are tied to pre-close wrongful acts that are reported post-close. Industry data shows the overwhelming majority of claims reported post-close are for pre-close wrongful acts which rise to the surface shortly after close. Therefore, it is extremely difficult to get an insurer to agree to place a tail / run-off policy effective at close if the terms and conditions are not negotiated prior to close.

Uninsured exposures: Entrepreneurs tend to take long-term risks that private equity investors avoid. Often this results in pre-close management leaving important exposures to loss uninsured even though there are insurance products that would easily address these items. Underwriters are more receptive to crafting policies to address these exposures if they can begin the process prior to close.

Efficient replacement of policies: Some insurance policies have provisions that require the insured to contact the insurer after a change in control. If a timely notice is not provided the insurer could have an argument to deny future claims. Also, the deal structure might necessitate a complete change to the insurance program.

Environmental liability

There is constant change to legal precedent regarding who is financially responsible for historical environmental liabilities. More and more, the power of indemnification wording in a purchase agreement is being limited as the courts continue to focus on finding anyone to address contamination issues. An Environmental Liability Insurance policy can protect your balance sheet against legacy contamination issues that are discovered post-close. Reliance Insurance will craft the terms and conditions of the policy with interested underwriters to work in conjunction with the indemnity language.

Growth plans, exit strategy, and program design: We can determine if the current insurance program is scalable and properly structured to meet the needs of your growth plans and exit strategy.

Our Deal Team has years of experience helping companies manage insurance risk through the merger and acquisition phase. Don’t leave this item unchecked, call us today to add a solid team member to your due diligence process. Reliance is Protection Beyond Insurance™.

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