A recent Gartner survey showed 60% of organizations will use cybersecurity risk as a primary determinant when engaging in M&A activity by 2025.
“There is a growing appetite for transactional risk insurance,” Michael Wakefield said, executive vice president and transactional insurance practice leader at CAC Specialty.
“At a high level, transactional risk insurance allows deal parties to transfer risk relating to an M&A transaction to insurance carriers,” he said. “Representations and Warranties Insurance (RWI), tax, and contingent risk are all types of transactional risk insurance covering breaches of representations and warranties made by the seller in the purchase agreement. When used in an M&A context, tax and contingent risk insurance generally cover known risks identified during diligence.”
Meanwhile, “Cybersecurity issues that arise post-closing can be so severe as to undermine a target company’s value and threaten the entire investment,” Wakefield added.
Wakefield said, “RWI is used regularly by deal parties in pretty much all industries and deal sizes, from a few million dollars to well into the billions of dollars in enterprise value.”
“Deal parties…
