Why does transaction liability exist?
In M&A deals. the seller typically holds liabilities should the deal fall through. If issues do occur then the seller will likely be financially responsible for any liabilities.
The risk can be diminished by taking out transaction liability insurance which will reimburse the policyholder should any loses occur.
By transferring risk over to an insurer it allows for:
Smooth transaction processes
Reduced credit risk for the policy holder
Cover for unknown risks