mergers & acquisitions insurance terminology

By: Jason Forsyth

Date: June 15, 2022

Category: Mergers & Acquisitions

Be it through necessity, or a simple desire to create a level of mystique around the products, Merger and Acquisition (M&A) insurance policies typically tend to depart from the more commonly adopted approach to insurance language.

While the majority of Property and Casualty (P&C) insurance contracts tend to follow a similar flow in terms of policy structure and drafting, M&A insurance policies are more closely aligned to a Sale and Purchase Agreement or Share Purchase Agreement (SPA) and tie back to a given transaction.

M&A insurance policies can sometimes be ‘over lawyered’ so don’t necessarily make for great reading. Nonetheless; for those that are not exposed to M&A insurance coverages on a regular basis, we list below some of the common industry terms and policy definitions that we would not typically see within the more traditional classes of P&C insurance.

Buy-Side Deal: this is where the Buyer takes out the policy and is the actual insured party. The Buyer is the party that is able to access and make a claim directly against the insurance policy subject to its terms and conditions. Buy-Side policies are the most commonly purchased form of warranty and indemnity insurance. The ability to claim directly against the policy also helps protect and preserve relationships between the parties in the event of a dispute or claim.

Data Room: a physical and/or virtual location established by the Seller, where all of the essential information and documentation relating to a given transaction is stored. It forms part of the due diligence process and is normally accessible on an as needs basis by authorised persons only.

De Minimis: comes from the Latin phrase “de minimis non curat lex” which means “law is not concerned with small things”. In the context of an M&A insurance policy, it refers to amounts that fall below a certain threshold and are therefore considered trivial or insignificant. In practical terms, the de minimis within the insurance policy will normally mirror the equivalent provision within the SPA and is designed to protect the Seller (and insurance policy) from minor claims which will normally be considered immaterial when compared to the overall transaction itself.

Disclosure: is a particularly important ingredient within all M&A transactions. Normally rolled up into a ‘Disclosure Letter’, this is a document that is produced by the Seller that contains a list of all of the important contracts, financial statements, registers, employee information, asset schedules, intellectual property documentation, circulars and any other relevant material including exceptions and qualifications. This is a time-consuming task and will normally go through a number of revisions. Poorly drafted disclosure documentation can lead to significant downstream liabilities against the Seller, while a well drafted letter or disclosure schedule will offer protection against potential allegations of a breach or misrepresentation on the Sellers’ behalf.

Due Diligence: this is a complex and time consuming albeit critical component within all M&A transactions. It refers to the process of examining, investigating and reviewing all information (typically financial and legal) related to the transaction with a view to arriving at an informed position or decision.

Enterprise Value: or E.V, is the amount or value that has been agreed between the parties to reflect the market value of a business or asset.

Escrow: refers to something that is kept in trust until specific conditions have been met. With respect to an M&A transaction, this is normally an amount of money or other consideration that is locked away for a pre-agreed period of time and only released once certain conditions have been met.

Indemnity: a contractually agreed commitment by one party (will typically have a greater focus on the Seller) to reimburse or compensate the other party in the event a liability was to arise as it relates to the transaction.

Knowledge: when attaching to the Seller, refers to known information or facts. The knowledge will be attributed to a defined set of individuals or positions e.g., the Chief Executive Officer, Company Secretary or other.

Sell-Side Deal: the opposite to a Buy-Side policy whereby the Seller is the policyholder. In this instance the Buyer will need to make a claim directly against the Seller for any loss that they may have suffered. The Seller would in turn claim against the insurance policy to recover covered losses. The insurer will likely dictate the flow of proceedings including managing the claim and defence as well as settlement negotiations.

Target: refers to the company or asset being acquired or sold. It is distinct and separate from the assets and liabilities and refers to the corporate entity itself.

Underwriting Fee: this is a non-refundable amount charged by the primary insurer (underwriter) to cover off the necessary fees and expenses they incur throughout the underwriting process. This amount will typically be used by the insurer to pay for the legal advisors that they appoint to work on the transaction on their behalf.

Warranty: is a statement made by the Seller at the time of the transaction that the Seller believes to be true and factually correct. Warranties are relied upon by the Buyer and provide them with contractual protection against the Seller in the event that they suffer a loss by virtue of a breach. A Warranty and Indemnity insurance policy will include a schedule that sets out all of the warranties as contained with an SPA, to which any given warranty will be noted as ‘covered’ or ‘not covered’ or ‘partially covered’.


As further consolidation occurs within many industries, so too will mergers, divestitures, acquisitions and other more bespoke transactions.

Insurance products form an integral part of supporting these transactions and in some instances can prove to be the ultimate enabler to a successful M&A deal outcome. With this, many of us might well become exposed to this growing class of business so we hope the above terminology tips help provide a small window into this interesting and emerging class of business.

For further information or support, please feel free to contact Jason Forsyth on or +353 (0) 83 206 0721.