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AIG ישראל
+
1997 2002 2006
AIG ישראל Facts & Figures
הינה ישות משפטית עצמאית מפוקחת
400,000
₪מיליון 700-כ
₪מיליון 56-כ
₪מיליון 375-כ
₪מיליון 29-כ
ישראל AIG-פוליסות ביטוח בתוקף ב
2010מחזור הפרמיה השנתי בשנת
2010סך הרווח הנקי בשנת
(31.12.10נכון ליום )סך ההון העצמי
סך עודף ההון העצמי מעבר לדרישות הפיקוח (31.12.10נכון ליום )
AIG ישראל
Truly Global Franchise
U.S. and Canada 2010 NPW: $17.2BN
Growth Economies 2010 NPW: $3.0BN
Europe 2010 NPW: $5.8BN
Far East 2010 NPW: $7.3BN
o 4 major regions: U.S. and Canada,
Europe, Far East, Growth Economies
o 9,000 claims professionals worldwide
Chartis Overview
o History: 90 years of underwriting experience
o Truly Global: 48% of premiums written outside of the U.S. and Canada
o Diversified: 62% commercial and 38% consumer
o Experienced: average senior management tenure = 20 years
o Innovative: over 200 new products and services launched in 2010
o Strength: 43,000 employees worldwide
Other / Service, 2%
Personal, 20%
Life, 2%
Casualty, 25%
Property, 10%
Specialty, 27%
Growth Economies,
9%
Far East, 22%
Europe, 17%
U.S. and Canada,
52%
Chartis 2010 NPW: $33.4BN 2010 NPW by Geography
2010 NPW by Business Segment
Chartis is a global P&C market leader with over $33 billion in 2010 NPW1
Introduction to Warranty and Indemnity Insurance Mergers & Acquisitions Insurance Group
Andrew Graham & Janine Fenwick
6
Agenda
• Who we are
• What is Warranty and Indemnity Insurance?
• Insurance Process Coverage & exclusions
What the Insurer needs
• Claims
7
Introduction – who are we?
Largest, longest established and most experienced team in
the global transactional insurance market;
Provide bespoke insurance solutions for transactions -
Warranty & Indemnity.
Our global team of seventeen underwriters consists of
corporate lawyers and litigators drawn from private practice
and based in the UK, Sweden, Germany, France, Spain, Italy,
Hong Kong, Australia and USA;
We have global capacity with offices in over 130 countries;
and
Globally over the past 12 months we have placed insurance on
in excess of 160 transactions (ex North America) in 28
different jurisdictions.
8
What is Warranty & Indemnity Insurance?
• We insure loss arising from breaches of the warranties or indemnities given by the seller in an acquisition.
• We can insure either the buyer or the seller.
• We insure either: • share sales (assets and liabilities) - extensive warranties
• asset sale only - more limited warranties
• Premiums are generally 1.5% to 3% of the limit (subject to minimum premium of USD75K).
• The policy will generally take a minimum of five working days to underwrite and bind from receipt of all requisite information and documentation.
9
Seller’s
risk
Buyer’s
risk
Policy of
indemnity Insurance
policy
Sale & Purchase
Agreement
Limitation
of liability
for breach
of
warranty
under the
SPA
Transaction
value
Policy
limit
•Insured: The warrantors
•Objective: To provide coverage in the event that the buyer
sues the seller for a breach of warranty or indemnity
•Structure: Can insure up to the warranty cap as defined
by the sale document
•Policy of indemnity: Seller still retains liability under sale
document, therefore is liable for any breach not
picked up by the insurance policy
Sell – Side Policy
10
Seller’s
risk
Buyer’s
risk Policy to
protect against
financial loss
Insurance
policy
Sale & Purchase
Agreement
Limitation
of liability
for breach
of
warranty
under the
SPA
Transaction
value
Policy limit
(buyer’s
risk
appetite to
determine
limit)
•Insured: The buyer
•Objective: To provide coverage against financial loss
suffered as a result of a breach of the seller’s
warranties
•Structure: Warrantors give warranties but these are capped
at a lower amount, the insurance policy sits in excess of this
•First party policy: Policy is independent of the seller,
therefore the buyer is entitled to make a claim
directly against the policy
Buy - Side Policy
11
Motivations for Insurance Seller Side
• Sellers unwilling or unable to give financial support behind warranties e.g. secondary buy-outs, acquisition from insolvent sellers;
• Reluctance of sellers to retain proceeds in escrow;
• Optimising a “clean” exit;
• Sale under a turnaround situation. Buyer Side • Investing in new or unfamiliar jurisdictions or industry sectors;
• Enhancing bidder status;
• Alternative to contractual recourse for a particular issue;
• Best practice risk management / corporate governance;
• Comfort to debt finance providers.
12
W&I Insurance - Policy Cover
Bespoke policy tailored to the transaction
Back-to-back with the SPA
– Covering breach of insured warranties - aim for full cover
– Duration matches survival period under SPA at a minimum
– Matching de minimis/thresholds under SPA
Covering defence costs
Covering fraud by the seller on a buyer-side policy
No requirement to pursue the seller before claiming under the
policy on a buyer-side policy
13
W&I Insurance – the policy exclusions
✗ Known issues )i.e. matters in the disclosure letter/buyer’s due
diligence)
✗ Completion account adjustments
✗ Fines and penalties to the extent they are uninsurable by law
✗ Fraud by the seller on a seller-side policy
✗ Forward-looking warranties
✗ Potentially transaction specific issues
14
Submission – what we need to see
a) Details of the Buyer and Seller
b) Details of the Target business
c) Transaction value
d) Limit of indemnity sought - Chartis capacity up to USD60,000,000
e) Retention insured is prepared to accept - N.B market standard is 1% of
transaction value
f) Does the insured want cover for both the warranties and a tax covenant
(if applicable) and any other transaction specific indemnities that are being
given by the Seller.
g) Estimated signing or completion date of the transaction
h) Attach the following documents:
SPA
Disclosure Letter
Tax Covenant/Deed (if there is one)
Due diligence (not always available on Seller side)
Data room index
15
Underwriting process
Day 1 Initial submission
Internal review
Heads of terms
Engagement letter
Detailed underwriting
Negotiate cover
Binding policy
Policy
review
Deal Signs
Ideally this will be about
14 days, but is has
been between 2 days
and18 months
16
Underwriting Considerations
Identity of the buyer and seller and their advisors
Target business and location
Quality of the transaction process
Value of transaction
Scope of the insured warranties - buyer or seller friendly?
Seller’s liability under the SPA
Gap between signing and completion?
Why do they want insurance?
Do both parties know about insurance?
17
Claims: Warranties alleged to have
been breached
A majority of alleged breaches relate to financial statements warranties
IP
9%
Financial
Statements
32%
Tax
28%
Environmental
6%
Multiple
25%
18
Claims Scenarios
Patent Infringement
– Seller-side policy responds to a claim brought against the seller for breach of
the intellectual property warranties resulting from a third party claim of patent
infringement
– Chartis paid USD1.5million in settlement and expenses to resolve the claim
Multiple Breaches
– Buyer-side policy responds to a claim brought by the buyer against the W&I
policy for alleged breaches of the warranties regarding financial statements and
operation of the business in the ordinary course.
– Buyer also sued the Seller for some of the breaches. Chartis contributed to the
Buyer’s overall recovery with over USD1m in settlement and expenses
Change of Control
– Buyer-side policy relating to a breach of the warranties relating to change of
control and contractual arrangements with key customers. Seller was
fraudulent.
– The buyer made a claim under the policy for USD7 million and following
negotiations with the buyer, Chartis agreed to pay USD5 million in settlement
and expenses to resolve the claim.
19
Any questions
20
You can find further information about our M&A Insurance Group and our products
on our homepage
http://www.chartisinsurance.com/_911_217012.html
Please feel free to contact us to discuss any questions you may have about our products.
Andrew Graham Janine Fenwick
European Manager Growth Economies
Tel: +44 20 7954 8558 Tel: +44 20 7954 8840
andrew.graham@chartisinsurance.com janine.fenwick@chartisinsurance.com
Mergers & Acquisitions Insurance Group
Chartis Europe Limited
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