W&I insurance
General considerations
In recent years, W&I insurance (as it's known in the UK) has become an effective bridge when it comes to the differing approaches to liability and recourse in the UK and US markets (see our Liability and recourse section for more information). Its prevalence enhances the security and attractiveness of a transaction for the buyer by mitigating risk and reducing the likelihood of post-transaction disputes, with the buyer’s principal mode of recovery now being against the insurance policy.
While historically the starting points for policies in UK W&I and US R&W have differed in certain key areas, there's an increasing tendency for UK insurers to incorporate aspects of US market practice in their policies (sometimes for an additional premium). This is in recognition of US buyers expecting wider coverage under their policy than buyers in the UK, albeit a US policy premium is typically higher than the price of a UK policy (see further detail below).
Please note the information in this section reflects market practices as of Q3 2024.
Key differences between UK W&I and US R&W
Recent market trends
Pricing and coverage
In both jurisdictions, pricing remains at historic lows while coverage has become broader as insurers fight over a relatively small number of attractive transactions to insure. New insurers continue to join the W&I market (suppressing pricing and offering broad coverage), so these market conditions are expected to continue well into 2025.
Claims process in the UK
Given the competitive insurance landscape in the UK and the fact that the product is now well established, insurers are looking to differentiate themselves by showing that they offer a superior claims handling service compared to the competition.
When deciding on the insurer, buyers should consider whether they have a proven track record of paying material claims and whether they have an efficient and collaborative approach to claims handling. Always ask your broker for information on their claims experience with a given insurer before underwriting commences.
Pricing and coverage
In both jurisdictions, pricing remains at historic lows while coverage has become broader as insurers fight over a relatively small number of attractive transactions to insure. New insurers continue to join the W&I market (suppressing pricing and offering broad coverage), so these market conditions are expected to continue well into 2025.
Claims process in the UK
Given the competitive insurance landscape in the UK and the fact that the product is now well established, insurers are looking to differentiate themselves by showing that they offer a superior claims handling service compared to the competition.
When deciding on the insurer, buyers should consider whether they have a proven track record of paying material claims and whether they have an efficient and collaborative approach to claims handling. Always ask your broker for information on their claims experience with a given insurer before underwriting commences.
Convergence between the two markets
Many UK W&I insurers now offer policies similar in coverage and process to US R&W. Features that are often seen as enhancements in UK W&I (eg non-disclosure of the due diligence reports and/or data room) are included to match the US position. Insurers are willing to adopt a more commercial approach to coverage and in some cases to use their R&W policy wording (with minor amendments for English law purposes) so that a US buyer making a UK/European acquisition is working with documents they are familiar with.
While these US-style policies won't necessarily provide as much protection as a standard US R&W policy, the gap in protection is closing quickly as UK insurers become more confident in underwriting in this manner. While pricing is higher than a regular UK W&I policy, US-style policies tend to be significantly cheaper than their US R&W equivalents, with excess options being offered at a more competitive rate than in the US market.
This is an important development as it allows all buyers of UK or European targets (whether they're only familiar with R&W, W&I or neither) to take advantage of the low-premium market conditions to obtain protections far above what would customarily be available on UK or European transactions.