W&I insurance is increasingly being used by deal parties and advisors in WA to streamline negotiations, achieve clean exits, and protect investments.
W&I insurance uptake surges in WA M&A market
A recent global survey[1] of senior executives by Mergermarket and Norton Rose Fulbright revealed that 65% of key dealmakers expect the use of Warranty & Indemnity (W&I) insurance in M&A transactions to increase in 2025.
An increase in the uptake of W&I for transactions is certainly a trend that James Smorthwaite, Associate Director at Willis, a WTW business, in Perth has witnessed in the local WA market. “As WA’s first specialist W&I insurance advisor, I have seen significant growth in the number of local enquiries and insured deals. Engagements from WA deal parties and M&A advisors have increased from 4 deals in 2023, to 20 deals in 2024. We have already been approached on 19 deals in the first half of 2025 – two exceeding $1bn each in enterprise value. We have a very busy pipeline this year”, James says.
Olivia Boyne, Perth based Partner at leading Australian corporate advisory firm Azure Capital, has also seen deal parties increasingly seek to de-risk their transactions through the use of W&I. “Over the last few years we have seen an increasing trend in the number of deals across the board where W&I is being discussed. The trend reflects a growing recognition of the value the insurance brings to streamlining negotiations and providing clean exits for shareholders.”
What is W&I insurance?
W&I insurance is a tool used by both buyers and sellers (traditionally in private transactions, but increasingly in public transactions also) to transfer warranty risk to the insurance market. It indemnifies the insured for financial loss due to breaches of warranties and representations given by the seller to the buyer in the sale agreement. Covered warranties typically include title and capacity, financial accounts, tax (including a standard tax indemnity), assets, employees, material contracts, regulatory compliance, IP, IT, litigation, and more. While relatively novel in Australia, W&I insurance is commonly used in the UK, EU, Asia, and the US to de-risk transactions.
Broad appeal across sectors and transaction values
W&I is increasingly being adopted across various industries and deal sizes. James says, “I have advised on public and private transactions, including business and asset sales, across sectors including mining and industrial services, agriculture, technology, construction, infrastructure, transport and logistics, real estate, resources, retail, and renewable energy, with enterprise values ranging from $5m to $3bn. Depending on parties’ risk appetite, and the cost of cover, most deals are insurable.”
Why sellers are driving demand
A key driver of W&I uptake is interest from sellers seeking a clean exit from the transaction, without the risk of future litigation. Typically, sellers retain multi-year long-tail liabilities relating to warranties and representations they give to the buyer, and are often required to hold funds in escrow to cover potential buyer warranty breach claims in future. W&I insurance allows sellers to give warranties, but transfer warranty breach risk to an insurer instead of standing behind the warranties themselves. This enables sellers to avoid future litigation exposure and allows them to receive the full sale proceeds upfront without a need for escrow. “This is especially attractive to private sellers who want to transact, receive the sale proceeds, and move on with life without looking over their shoulder for the warranty claim period. It provides peace of mind,” James explains.
Buyer benefits and strategic uses
Buyers also benefit from W&I insurance, gaining financial protection and recourse against deep-pocketed insurers with a strong financial rating, rather than pursuing seller shareholders through the courts. James highlights the appeal to overseas investors and publicly listed buyers seeking to reduce acquisition risk for their shareholders. “In one deal, seller shareholders stayed on as employees post-acquisition. Without W&I, in the event of a warranty breach, the buyer would have to sue their new employees. W&I removed that risk,” he says.
W&I can also provide enhanced warranty claims thresholds, and financial and time limitations for buyers, beyond what is typical in sale agreements.
A deal facilitation tool
Beyond risk mitigation, W&I insurance helps facilitate deal negotiations. “Warranty negotiations can be contentious and derail transactions, as deal teams and lawyers look to push liability from one party to the other,” James notes. “W&I removes that friction by transferring the risk to insurers, easing negotiations and increasing deal execution certainty.”
Market conditions are favourable
Now is an opportune time to consider W&I insurance. Premium rates are at historic lows, driven by increased insurance capacity in the Pacific region. “In the past 24 months, we’ve seen insurers compete to drive down pricing and cover warranties they previously excluded,” James says. “Subject to specific due diligence and severity of risk, insurers can now consider coverage for condition of physical assets, pollution, static risks in relation to projects in construction, employment matters, and more.”
Olivia adds, “Increasing use of vendor due diligence, supplemented by targeted buyside diligence, means the level of scrutiny is now sufficient to satisfy insurers and makes W&I insurance a viable option in more situations.”
Getting Started
For buyers or sellers interested in W&I insurance, James recommends contacting Willis or speaking with M&A advisors early in the transaction process. “A deal party’s advisors are well placed to assess how W&I can be incorporated into the transaction from the beginning.”
Willis is Australia’s leading M&A insurance advisor, having placed W&I policies for over 1,000 transactions totalling more than $200bn in enterprise value. The firm advises on 60% of all insured deals in the region, with James serving as WA’s first and only dedicated W&I insurance specialist.
To contact James directly, click here.
For more information on Willis’s M&A capabilities, click here.
[1] Norton Rose Fulbright / Mergermarket, “Global M&A trends and risks 2025”, p.24
