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Title Insurance

Providing protection against loss resulting from defects or failure of title to the property and/or the shares of the acquired entities that hold the asset.
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Title insurance is a valuable tool in mitigating risks associated with mergers and acquisitions (M&A) transactions in Europe. It provides protection against financial loss resulting from defects or failure of title to the property and/or shares of the acquired entities. This means that if there are any losses with ownership or legal rights, the title insurance policy can cover resulting financial losses.

The combination of comparatively low pricing and the extensive cover on offer has led to a significant increase in title insurance policies being utilized on M&A transactions across Europe.

Key motivations to use title insurance policies

  1. Facilitate a clean exit for the seller and avoid contingent liabilities on sale.
  2. Provide surety of ownership for the buyer against an insurer that meets Marsh’s minimum financial guidelines.
  3. Provide an alternative method of recourse to bidders in an auction process.
  4. Indemnify against loss of title.
  5. Satisfy lenders who may require proof of title.

 

Integration with R&W/W&I insurance

A title insurance policy can be placed alongside a representations and warranty (R&W)/warranty and indemnity (W&I) insurance policy or can sit in excess of one. Its comprehensive coverage and relatively low cost compared to potential financial risk makes it an attractive option for parties involved in M&A transactions.

There are other contrasts between these policies including:

  • Policy period: A R&W/W&I insurance policy period typically mirrors the time limitations in the single premium annuity (SPA). For a title insurance policy, the policy term is for life of ownership or term of mortgage and for the insured’s own future warranty exposure period.
  • Trigger event of the policy: A R&W/W&I insurance policy responds to unknown breaches of warranty or a call under the tax deed or covenant, whereas a title insurance policy does not require a breach of warranty provided there is a defect in title.
  • Breadth of title cover: A title insurance policy often provides broader coverage for title issues than R&W/W&I insurance due to the ability to cover some known defects.

Why Marsh?

Marsh is a global leader in insurance broking and risk management. The Private Equity and M&A (PEMA) Practice at Marsh has a specialist transactional risk team that comprises individuals from a variety of professional backgrounds, including law and investment banking, as well as insurance. The team is dedicated to arranging bespoke insurance solutions, such as title insurance, R&W/W&I insurance, and specific policies to ring-fence.