Corporate Finance Insurance


Corporate financiers provide a range of financial services and advice to companies, institutions and governments seeking to manage corporate, strategic or financial opportunities. These include acting on behalf of the client in financing and managing (or even defending) mergers, acquisitions and reconstructions; raising money on the capital markets, such as issuing bonds (debt), shares (equity) or lending money; supporting privatisations for government, managing initial public offerings (IPOs) and other flotations. Corporate finance includes advising on and leading management buyouts, providing strategic advice to clients and identifying and securing new deals.

In view of the diverse range of activities undertaken by corporate financiers the internal risk exposure to the finance house and its directors and officers comes principally from the area of alleged professional negligence - See Financial institution professional indemnity insurance - and from the 'joint and several' liability attaching to the directors as a consequence of a wrongful act or a breach of duty. See Financial Institution Directors' & Officers Liability Insurance.

We are able to provide specialist products to corporate financiers to protect the liability of their companies and the individuals involved.

There are numerous additional risks involved in the world of mergers and acquisitions and these originate from the nature of the deals themselves. Additional coverage can be arranged in the following areas:

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Warranty and Indemnity Insurance
Warranty and Indemnity insurance (W&I) backs those obligations, in the form of warranties, given in a Sale and Purchase Agreement (SPA). In the event that one or more of the warranties proves to be incorrect, then the purchaser can lodge a claim against the warrantors (in most cases the vendors) for the loss that they have suffered typically up to seven years post completion.

In the event that a breach of warranty is proven, the warrantor will be liable to make good the loss suffered as a result of the breach.

A typical policy covers the insured for loss arising due to a breach of the insured warranties and/or a call on the tax indemnity. It is possible for the vendors or the purchasers to be the insured party.

The policy wording is generally based upon the lead underwriter's standard form which is then tailored to meet the coverage requirements of each transaction and create a bespoke solution.

There are some standard exclusions to the coverage which are non-negotiable, generally relating to the conduct of the insured. This type of insurance is not designed to cover forward looking warranties or performance guarantees.
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Prospectus Liability Insurance
Listing particulars and the prospectus need to include detailed information on various aspects of the issuing company's business.

Whilst there are strict regulations in place to guide the directors regarding the information to be provided, the personal responsibility for the contents and accuracy of the information falls largely with the directors who will be jointly and severally liable for mis-statements or omissions.

Prospectus Liability insurance (also known as Initial Public Offering Insurance(IPO)) covers potential liabilities arising out of:
  • The issue documents, e.g. the prospectus/listing particulars.
  • Prior activities in connection with the offering, e.g. negotiations, discussions and decisions.
  • Non-US listings and certain US listings.
  • Cover may also include legal and other defence costs incurred in connection with a claim against the insured and may even extend to public relations and crisis management expenses.
Who should consider this insurance?
Both the issuing organisation and the directors and officers may be covered by the policy. In addition it can offer protection to claims lodged against other employees of the company. It can also be extended to include the professional advisors to the transaction (if required).
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Intellectual Property Rights Insurance (IPRI)
This insurance indemnifies you for legal expenses arising from the following:
  • The pursuit of any claim or legal proceedings in the civil courts arising from either the infringement or alleged infringement of your IPR.
  • The defence of any claim or legal proceedings made in civil courts arising from the infringement of IPR.
  • The pursuit of any claim or legal proceedings in the civil courts arising from any breach of a written confidentiality agreement or licence agreement.
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Environmental Insurance
Environmental insurance (also known as 'Environmental Impairment Liability' or 'Pollution Legal Liability' insurance) is designed to protect against such liability.

Policies are typically assignable to future purchasers and their backers, and are therefore particularly attractive in mergers and acquisitions.

Environmental Insurance policies are available from some of the world's largest insurers, are usually written for between 1 and 10 years duration, can attach to a single site or a portfolio of sites, and can be tailored to address specific risks. Policies also cover for changes in legislation.

Coverage includes:
  • New pollution and unknown historical conditions.
  • On and off site clean up costs.
  • On and off site third party liability (property damage / bodily injury).
  • Insured's business interruption.
  • Legal defence and investigation costs.

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Edward Howard Insurance Services Ltd. is authorised and regulated by the Financial Services Authority. FSA Reference Number 306921 Registered in England. Company No. 3520697