In this episode of Data Room’s Dealmakers Series, Partner and Head of Corporate Auckland, Neil Millar is joined by Andrew Stubbings, from Willis Towers Watson, to unpack the mechanics, benefits, and evolving trends of W&I insurance in M&A transactions. From its origins in New Zealand to its current applications in complex deal structures, Andrew provides a deep dive into how W&I insurance works, when it’s most useful, common pitfalls, pricing dynamics, and how the underwriting process unfolds. The episode also explores recent innovations in the market and offers practical advice for both buyers and sellers navigating W&I coverage.
[01:02] Andrew and Neil reflect on their shared history, including the first W&I deal in New Zealand in 2006 involving PEP and Independent Liquor. Andrew shares his journey from legal practice to insurance, founding Risk Capital Advisors, and joining Willis Towers Watson.
[02:15] Andrew explains W&I as a risk transfer tool, primarily buy-side, allowing buyers to claim against insurers rather than sellers. The discuss the difference between buy-side and sell-side policies, and how they shift liability from sellers to insurers.
[04:34] Andrew outlines scenarios where W&I is particularly beneficial, including competitive auctions, PE transactions, and deals with multiple shareholders.
[06:30] Neil and Andrew address shareholder liability and PE fund exits, exploring how W&I helps resolve joint vs. several liability issues and supports PE funds in releasing capital post-sale.
[07:57] They step through the W&I process and timeline of how a typical W&I process works, from initial documents to insurer selection and underwriting.
[09:49] They discuss what insurers look for during underwriting, including assessing diligence quality, alignment with warranties, and the scope of unknown risks to determine coverage. Neil and Andrew compare underwriting to defensive driving—insurers want to see risk mitigation, not perfection.
[13:10] Andrew discusses the dramatic drop in premiums from 1.8% to around 0.9%, driven by increased insurer competition. He also offers insight into how reinsurers may influence future pricing due to aggregation risks and economic pressures.
[16:01] Key exclusions and coverage gaps related to actual knowledge, insufficient due diligence, and standard carve-outs like environmental issues are discussed, as well as how competition has led to better coverage terms and fewer exclusions, especially for standard business risks.
[18:56] Importance of seller engagement and quality advisors, the emphasise the seller’s role in Q&A and disclosure, and the value of experienced advisors in smoothing the process.
[20:16] Explanation of what New Breach Cover is, when it applies, and why it’s rarely used due to high cost and limited applicability.
[23:07] Andrew and Neil offer guidance on handling extended deal timelines due to regulatory approvals, and why parties often resolve risks outside of insurance.
[24:04] Andrew highlights new applications of W&I in public-to-private deals, infrastructure transactions, and PE continuation funds. He also shares his outlook on the New Zealand W&I market, noting it's slightly behind Australia but showing signs of increased activity.
Information in this episode is accurate as at the date of recording, 12 May 2025.
Please contact Neil Millar or our Corporate M&A team if you need legal advice and guidance on any of the topics discussed in the episode.
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