Mergers, acquisitions, new investors: how to secure insurance during the transition

Introduction

During a merger, acquisition, or the entry of an investor , the positioning of business insurance changes dramatically. Without a structured risk management approach , coverage may remain inadequate, exposing the SME to unforeseen costs or insufficient protection after the transaction closes. After reading this, you will know what decisions to make, what to document, and what to monitor to secure your insurance throughout the transition and post-transaction period.

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1. What changes for insurance companies during a business transition?

1.1 Change in risk profile

A merger or acquisition changes the business model, liability exposure, and often the geographical areas or activities involved. This has a direct impact on the insurance required:

• Existing risks may evolve (new responsibilities, new assets, technical or regulatory risks).

• Potential liabilities may be expressed after closing, particularly for contractual guarantees and representations.

In M&A transactions, specific products called Representations & Warranties (W&I) are often used to cover losses related to inaccuracies in the seller's representations or unforeseen liabilities [turn0search0][turn0search3].

1.2 The role of insurance management

Effective risk management goes beyond simply knowing what coverage exists. It requires a holistic view: understanding where your risks lie , how they are currently insured , and how they fit into the post-transaction structure . This informed governance is essential for executives, CFOs, and HR managers.

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2. Due diligence assurance: structured analysis before closing

Assurance due diligence is a systematic review of the target company's policies and risk management practices. It helps to identify:

• Potential coverage gaps or exclusions .

• Policies that are unsuitable for future activities.

• Uninsured risks that could become liabilities after the transaction.

This work is part of the overall due diligence (financial, legal, operational) and should ideally be carried out before signing to influence negotiations and the price of the transaction [turn0search7][turn0search19].

2.1 Key steps in due diligence assurance

A typical process includes:

1. Collection of existing insurance contracts (all types: property, liability, cyber, D&O, health/social protection where applicable).

2. Review of clauses, exclusions and limitations in light of future risks.

3. Analysis of claims history and associated deductibles.

4. Assessment of the consistency of the hedges with the post-deal strategy.

5. Identification of adjustment needs (extensions, portfolio mergers, renegotiation of terms).

2.2 Impact on the negotiation

The results of this due diligence may influence:

• The price of the transaction , if significant shortcomings or risks are discovered.

• Contractual clauses , for example adjusting the guarantees offered by the seller.

• The needs for transactional insurance (W&I) to cover specific risks related to the transaction itself and not covered by basic policies [turn0search3][turn0search0].

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3. Review and adjust the contracts before and after closing

3.1 Transfer or integration of policies

At the end of the process, it is important to decide whether the target's policies:

• Remain active as is , with a change of beneficiary or holder.

• Are consolidated with those of the new set.

• Are terminated and replaced.

Without a clear strategy, there is a risk of a coverage gap , especially if a contract expires or becomes unsuitable for the new business [turn0search12].

3.2 Specific Transactional Insurance

Representations and warranties (W&I) insurance protects against breaches of representations and warranties made in the sales agreement, giving buyers a direct route to claim against the insurer rather than having to sue the seller [turn0search3].

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4. Guidelines and checklist

What needs to be documented

• Copies of all insurance policies (all risks and all regions).

• Detailed claims history.

• List of important exclusions and limitations.

• Premium deadlines, deductibles and special conditions.

• Evidence of regulatory compliance (social security, LAA, LPP if applicable).

Actionable checklist

| Area | Action to be taken | Responsible party |

| Existing contracts | Gather and index all policies | CFO/Insurance |

| Key Exclusions | Identify and Document Coverage Omissions | Broker |

| Open Claims | Clarifying Pre/Post-Transition Management | HR/Insurance |

| Transactional Coverage | Assess W&I Needs | Executive & Broker |

| Post-deal alignment | Policy integration plan | CFO/Insurance |

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5. Common mistakes and how to avoid them

5.1 Neglecting insurance in overall due diligence

Mistake: focusing solely on the financial/legal dimension.

Impact: unpleasant post-deal surprises, unanticipated costs.

Solution: integrate a structured assurance review from the beginning of the process.

5.2 Postpone adjustment decisions until after closing

Error: Leave hedging adjustments after the transaction.

* Impact: risks not covered between the signing and activation of new contracts.

Solution: plan and execute the integration before closing.

5.3 Omit transactional hedges

Error: Do not consider W&I insurance or equivalent.

Impact: direct financial liability in case of breach of guarantees.

Solution: Discuss transaction hedging options with the broker before trading.

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6. Questions to ask your insurer/broker

1. What current risks are poorly covered in the existing portfolio?

2. Are the current policies transferable or do they need to be renewed?

3. What exactly does representations and warranties insurance cover?

4. What is the history of claims and what are the trends?

5. Are there any major exclusions that require extensions?

6. How can we continuously integrate our post-transition coverage?

7. What franchises and conditions may affect the transition?

8. What additional costs should be considered to mitigate transactional risks?

9. How to manage international policies (if applicable)?

10. What claims follow-up plan do you recommend after closing?

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Conclusion

Securing insurance coverage during a merger, acquisition, or investor buyout requires structured management: thorough due diligence, review of existing contracts, and strategies to mitigate transactional risks. Active insurance governance allows you to anticipate and document areas of exposure, effectively integrate portfolios, and avoid costly surprises after the transaction. The next step is to formalize insurance due diligence with your broker before any agreements are signed.