Warranty and indemnity insurers can benefit from 'nil-recourse' transactions

Nil-recourse transactions are likely to result in greater freedom to exercise the insurer's right of subrogation

By Kirsty Hick and Simon Radcliffe, Norton Rose Fulbright

In recent years, seller-driven sale processes have seen an increase in the number of transactions where sellers seek to achieve a "nil-recourse" position on exit. Typically, such transactions depend on warranty and indemnity (W&I) insurance to achieve this. Insurers tend to treat a nil-recourse transaction with a degree of caution, as the fact the seller has no "skin in the game" gives rise to the risk it may not be encouraged to carry out a thorough disclosure process or negotiate the warranties as hard as it might otherwise.