6. ביטוח לעסקאות מיזוג ורכישה

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6. ביטוח לעסקאות מיזוג ורכישה

  1. 1. AIG ישראל + 1997 2002 2006
  2. 2. AIG ישראל Facts & Figures הינה ישות משפטית עצמאית מפוקחת 400,000 כ - 700 מיליון ₪ כ - 56 מיליון ₪ כ - 375 מיליון ₪ כ - 29 מיליון ₪ פוליסות ביטוח בתוקף ב - AIG ישראל מחזור הפרמיה השנתי בשנת 2010 סך הרווח הנקי בשנת 2010 סך ההון העצמי ( נכון ליום 31.12.10) סך עודף ההון העצמי מעבר לדרישות הפיקוח ( נכון ליום 31.12.10) AIG ישראל
  3. 3. Truly Global Franchise U.S. and Canada 2010 NPW: $17.2BN Growth Economies 2010 NPW: $3.0BN Europe 2010 NPW: $5.8BN Far East 2010 NPW: $7.3BN <ul><li>4 major regions: U.S. and Canada, Europe, Far East, Growth Economies </li></ul><ul><li>9,000 claims professionals worldwide </li></ul>
  4. 4. Chartis Overview <ul><li>History: 90 years of underwriting experience </li></ul><ul><li>Truly Global: 48% of premiums written outside of the U.S. and Canada </li></ul><ul><li>Diversified: 62% commercial and 38% consumer </li></ul><ul><li>Experienced: average senior management tenure = 20 years </li></ul><ul><li>Innovative: over 200 new products and services launched in 2010 </li></ul><ul><li>Strength: 43,000 employees worldwide </li></ul>Chartis 2010 NPW: $33.4BN 2010 NPW by Geography 2010 NPW by Business Segment Chartis is a global P&C market leader with over $33 billion in 2010 NPW1
  5. 5. Introduction to Warranty and Indemnity Insurance Mergers & Acquisitions Insurance Group Andrew Graham & Janine Fenwick
  6. 6. Agenda <ul><li>Who we are </li></ul><ul><li>What is Warranty and Indemnity Insurance? </li></ul><ul><li>Insurance Process </li></ul><ul><ul><li>Coverage & exclusions </li></ul></ul><ul><ul><li>What the Insurer needs </li></ul></ul><ul><li>Claims </li></ul>
  7. 7. Introduction – who are we? <ul><li>Largest, longest established and most experienced team in the global transactional insurance market; </li></ul><ul><li>Provide bespoke insurance solutions for transactions - Warranty & Indemnity. </li></ul><ul><li>Our global team of seventeen underwriters consists of corporate lawyers and litigators drawn from private practice and based in the UK, Sweden, Germany, France, Spain, Italy, Hong Kong, Australia and USA; </li></ul><ul><li>We have global capacity with offices in over 130 countries; and </li></ul><ul><li>Globally over the past 12 months we have placed insurance on in excess of 160 transactions (ex North America) in 28 different jurisdictions. </li></ul>
  8. 8. What is Warranty & Indemnity Insurance? <ul><li>We insure loss arising from breaches of the warranties or indemnities given by the seller in an acquisition. </li></ul><ul><li>We can insure either the buyer or the seller. </li></ul><ul><li>We insure either: </li></ul><ul><ul><ul><ul><ul><li>share sales (assets and liabilities) - extensive warranties </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>asset sale only - more limited warranties </li></ul></ul></ul></ul></ul><ul><li>Premiums are generally 1.5% to 3% of the limit (subject to minimum premium of USD75K). </li></ul><ul><li>The policy will generally take a minimum of five working days to underwrite and bind from receipt of all requisite information and documentation. </li></ul>
  9. 9. Sell – Side Policy Policy of indemnity Insurance policy Sale & Purchase Agreement Limitation of liability for breach of warranty under the SPA Transaction value Policy limit <ul><li>Insured: The warrantors </li></ul><ul><li>Objective: To provide coverage in the event that the buyer sues the seller for a breach of warranty or indemnity </li></ul><ul><li>Structure: Can insure up to the warranty cap as defined by the sale document </li></ul><ul><li>Policy of indemnity: Seller still retains liability under sale document, therefore is liable for any breach not picked up by the insurance policy </li></ul>Seller’s risk Buyer’s risk
  10. 10. Buy - Side Policy Seller’s risk Buyer’s risk Policy to protect against financial loss Insurance policy Sale & Purchase Agreement Limitation of liability for breach of warranty under the SPA Transaction value Policy limit (buyer’s risk appetite to determine limit) <ul><li>Insured: The buyer </li></ul><ul><li>Objective: To provide coverage against financial loss suffered as a result of a breach of the seller’s warranties </li></ul><ul><li>Structure: Warrantors give warranties but these are capped at a lower amount, the insurance policy sits in excess of this </li></ul><ul><li>First party policy: Policy is independent of the seller, therefore the buyer is entitled to make a claim directly against the policy </li></ul>
  11. 11. Motivations for Insurance <ul><li>Seller Side </li></ul><ul><li>Sellers unwilling or unable to give financial support behind warranties </li></ul><ul><li> e.g. secondary buy-outs, acquisition from insolvent sellers; </li></ul><ul><li>Reluctance of sellers to retain proceeds in escrow; </li></ul><ul><li>Optimising a “clean” exit; </li></ul><ul><li>Sale under a turnaround situation. </li></ul><ul><li>Buyer Side </li></ul><ul><li>Investing in new or unfamiliar jurisdictions or industry sectors; </li></ul><ul><li>Enhancing bidder status; </li></ul><ul><li>Alternative to contractual recourse for a particular issue; </li></ul><ul><li>Best practice risk management / corporate governance; </li></ul><ul><li>Comfort to debt finance providers. </li></ul>
  12. 12. W&I Insurance - Policy Cover <ul><li>Bespoke policy tailored to the transaction </li></ul><ul><li>Back-to-back with the SPA </li></ul><ul><ul><li>Covering breach of insured warranties - aim for full cover </li></ul></ul><ul><ul><li>Duration matches survival period under SPA at a minimum </li></ul></ul><ul><ul><li>Matching de minimis/thresholds under SPA </li></ul></ul><ul><li>Covering defence costs </li></ul><ul><li>Covering fraud by the seller on a buyer-side policy </li></ul><ul><li>No requirement to pursue the seller before claiming under the policy on a buyer-side policy </li></ul>
  13. 13. W&I Insurance – the policy exclusions <ul><li>Known issues (i.e. matters in the disclosure letter/buyer’s due diligence) </li></ul><ul><li>Completion account adjustments </li></ul><ul><li>Fines and penalties to the extent they are uninsurable by law </li></ul><ul><li>Fraud by the seller on a seller-side policy </li></ul><ul><li>Forward-looking warranties </li></ul><ul><li>Potentially transaction specific issues </li></ul>
  14. 14. Submission – what we need to see <ul><ul><li>Details of the Buyer and Seller </li></ul></ul><ul><ul><li>Details of the Target business </li></ul></ul><ul><ul><li>Transaction value </li></ul></ul><ul><ul><li>Limit of indemnity sought - Chartis capacity up to USD60,000,000 </li></ul></ul><ul><ul><li>Retention insured is prepared to accept - N.B market standard is 1% of transaction value </li></ul></ul><ul><ul><li>Does the insured want cover for both the warranties and a tax covenant (if applicable) and any other transaction specific indemnities that are being given by the Seller. </li></ul></ul><ul><ul><li>Estimated signing or completion date of the transaction </li></ul></ul><ul><ul><li>Attach the following documents: </li></ul></ul><ul><ul><ul><ul><ul><li>SPA </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Disclosure Letter </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Tax Covenant/Deed (if there is one) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Due diligence (not always available on Seller side) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Data room index </li></ul></ul></ul></ul></ul>
  15. 15. Underwriting process Day 1 Initial submission Internal review Heads of terms Engagement letter Detailed underwriting Negotiate cover Binding policy Policy review Deal Signs Ideally this will be about 14 days, but is has been between 2 days and18 months
  16. 16. Underwriting Considerations <ul><li>Identity of the buyer and seller and their advisors </li></ul><ul><li>Target business and location </li></ul><ul><li>Quality of the transaction process </li></ul><ul><li>Value of transaction </li></ul><ul><li>Scope of the insured warranties - buyer or seller friendly? </li></ul><ul><li>Seller’s liability under the SPA </li></ul><ul><li>Gap between signing and completion? </li></ul><ul><li>Why do they want insurance? </li></ul><ul><li>Do both parties know about insurance? </li></ul>
  17. 17. Claims: Warranties alleged to have been breached A majority of alleged breaches relate to financial statements warranties
  18. 18. Claims Scenarios <ul><li>Patent Infringement </li></ul><ul><ul><li>Seller-side policy responds to a claim brought against the seller for breach of the intellectual property warranties resulting from a third party claim of patent infringement </li></ul></ul><ul><ul><li>Chartis paid USD1.5million in settlement and expenses to resolve the claim </li></ul></ul><ul><li>Multiple Breaches </li></ul><ul><ul><li>Buyer-side policy responds to a claim brought by the buyer against the W&I policy for alleged breaches of the warranties regarding financial statements and operation of the business in the ordinary course. </li></ul></ul><ul><ul><li>Buyer also sued the Seller for some of the breaches. Chartis contributed to the Buyer’s overall recovery with over USD1m in settlement and expenses </li></ul></ul><ul><li>Change of Control </li></ul><ul><ul><li>Buyer-side policy relating to a breach of the warranties relating to change of control and contractual arrangements with key customers. Seller was fraudulent. </li></ul></ul><ul><ul><li>The buyer made a claim under the policy for USD7 million and following negotiations with the buyer, Chartis agreed to pay USD5 million in settlement and expenses to resolve the claim. </li></ul></ul>
  19. 19. Any questions
  20. 20. <ul><li>You can find further information about our M&A Insurance Group and our products on our homepage </li></ul><ul><li>http://www.chartisinsurance.com/_911_217012.html </li></ul>Please feel free to contact us to discuss any questions you may have about our products. Andrew Graham Janine Fenwick European Manager Growth Economies Tel: +44 20 7954 8558 Tel: +44 20 7954 8840 [email_address] janine.fenwick@chartisinsurance.com Mergers & Acquisitions Insurance Group Chartis Europe Limited

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