Aon ASATS: Transaction Liability Solutions


Transaction Liability

Aon's global transaction liability team delivers risk transfer solutions for corporate M&A and private equity investment. These strategies can be tailored to protect either the seller's liability under the sale agreement, or to increase the level and scope of financial protection for buyers and their lenders.

Our team increases the deal value by converting deal risk to a one-off premium cost that is transferred to the insurance market. These policies can cover risks that include breach of warranty, tax claims or litigation, or environmental liability. Protection like this gives both sides confidence the company, shareholders, and lenders need to complete the transaction

Reps & warranty / warranty & indemnity

Regardless of location, when an escrow's duration exceeds three or more months, representation and warranty (R&W) insurance (aka warranty and indemnity) is the financially superior alternative to typical escrow and indemnification. Typically, substituting an R&W policy in lieu of typical escrow can add 1-3% of value to any given deal.

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Tax opinion / tax credit insurance

Tax insurance can protect against unanticipated or ill-timed occurrence of a tax loss. Transaction parties have often relied upon tax insurance to navigate tax exposures in M&A transactions, and corporate taxpayers are now seeing it as a means to address ongoing business tax risk. Its potential scope ranges from corporate issues (tax-free reorganizations, section 338(h)(10) elections), renewable energy and historic tax credit investments, net operating losses, partnership issues, golden parachute excise taxes, and so on. Insurers will consider submissions in respect of federal, state, local, and/or foreign taxes, making it an effective means of protecting against an unpredictable or catastrophic drain on cash flow.

Some of the situations which have lent themselves to the use of tax insurance include:
  • Tax-free reorganizations 
  • Tax-free mergers
  • Tax-free spin offs
  • Executive benefits issues
  • Net operating losses
  • Partnership issues
  • Structured real estate transactions
  • Retroactive change in law 
  • Tax credits
  • Low income housing (section 42)
  • Historic rehabilitations (sec. 47)
  • REIT qualification
  • Consolidated return issues
  • Tax-exempt financings
  • Transferee or successor liability
  • S corporations / 338(h)(10) elections

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Other Risks

The deal environment is very dynamic. Specific risks may not neatly fit into a "reps & warranty" or "tax" category. We frequently engage deal teams on a broad array of topics. Our transaction liability team has a long track record of providing innovative, bespoke solutions covering more esoteric risk such as litigation, environmental, and fraudulent conveyance to name a few.