As Trowers & Hamlins celebrates 30 years in Abu Dhabi, we reflect on the growing trends in M&A transactions within the UAE and wider GCC region, in particular the use of Warranty and Indemnity insurance (W&I insurance).
W&I insurance has been commonly used in M&A transactions across various jurisdictions over the last few decades. W&I insurance provides buyers with assurance and certainty over the ability to recover losses arising from breach of warranty and tax indemnity claims as the buyer will claim for such losses directly against the policy instead of the seller and mitigates the seller's risk as they have assurance that claims will not be made against them.
In recent times, we have seen the use of W&I insurance increase significantly in the UAE transactions we are working on which highlights its rise in popularity in the region.
We discussed the trend with Munal Hema Mehta, Head of Middle East & Africa at specialist M&A insurance broker HWF Partners, who noted that:
“In the last couple of years, we have seen our practice grow exponentially and have placed policies for investors across the GCC in a range of sectors, including healthcare, technology, F&B. This recent growth is the result of various pieces of the puzzle coming together. As the GCC Sovereign Funds take a more aggressive approach to securing majority stakes in outbound acquisitions they have been introduced to the notion of W&I on such processes.
They have learnt from these experiences, educated themselves and are successfully importing that gained knowledge to regional deals. In addition, the insurers have generally broadened their appetite as more and more GCC deals have come to market. An increase in W&I deal flow has invariably resulted in greater comfort by the insurers, which in turn has seen a drop in pricing, making the product more palatable to all parties. We are confident that the growth we have seen will continue in the years to come and we look forward to working with our clients to allow them to achieve their commercial goals.”
