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:
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Smooth transaction processes
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Reduced credit risk for the policy holder
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Cover for unknown risks
Often transactions for M&A's fall through due to failure to show true financial statements, failure in complying with the law (e.g. health and safety standards), tax breaches and employment law breaches. If any of these occur in the middle of a transaction then the seller will be liable and could suffer monumental liabilities.
Transaction liability insurance steps in to allow for a smooth process in claiming losses rather than having to go through long and expensive legal proceedings. It will also remove the threat of financial punishment for the policyholder.
Have any questions? please don’t hesitate to contact one of our team
Matt.price@ascendbrokingold.co.uk | Office: 01245 449062 | Mobile: 07841 020712
Matthew has 35 years broking and underwriting experience, both as part of the management team at an award-winning independent broker, as National Broking Director and UK Board member at Oval Insurance Broking and as Market Management Director at Arthur J Gallagher.
Matthew is a well-known figure within the insurance market, and, with his experience and connections, our clients benefit by being able to access specialist insurers at reduced distribution costs.
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