Transaction liability insurance (TL) has become a key tool in M&A transactions, allowing buyers and sellers to allocate risks and secure better deal terms. Aon has significantly expanded its role in this market, providing tailored insurance solutions for representations and warranties, tax liabilities, and litigation risks. The company's expertise has resulted in substantial growth in placed limits and successful case studies demonstrating its effectiveness in high-stakes transactions.

1. Risk. Reinsurance. Human Resources.
Aon Risk Solutions
Aon Transaction Solutions
Why Use Transaction Liability
Insurance in 2016?
Transaction Liability Insurance “TL” products (covering Representations and Warranties, Tax,
Litigation and other Contingent risks) have emerged not only as viable alternatives to an escrow
or indemnity in any deal structure, but as a staple of the M&A landscape. TL is a relied-upon
deal tool for lawyers, bankers, investors, and M&A practitioners to allocate risk out of a deal into
the insurance markets for a fixed cost. This ability to manage and allocate risk on the front end of
a deal has allowed buyers to bid more aggressively and sellers to extract more funds at closing.
We’re here to
empower results
Michael J. Schoenbach
Co-Practice Leader/Senior
Managing Director
+1.212.441.2337
+1.917.370.2899
michael.schoenbach@aon.com
Gary P. Blitz
Co-Practice Leader/Senior
Managing Director
+1.212.441.1106
+1.301.704.4640
gary.blitz@aon.com
Matthew Heinz
Co-Practice Leader/Senior
Managing Director
+1.212.441.1602
+1.917.582.7990
matthew.heinz@aon.com
Elliot Konopko
Senior Managing Director
+1.212.441.1164
+1.917.602.1816
elliot.konopko@aon.com
Allyson Coyne
Managing Director
+1.215.255.1715
+1.267.408.0971
allyson.coyne@aon.com
Aon has led the expansion and maturation of Transaction Liability Insurance over the past 15 years, and has
built a dedicated team in this space, with former M&A and Tax attorneys located in New York, Chicago,
Philadelphia, Washington, D.C., Toronto and San Francisco and have global support in Bermuda, London,
Sydney and Hong Kong.
Aon placed almost 220 TL insurance programs policies in the US in 2015, binding roughly $7.2B in limits of liability
and servicing an expanse of deals from the lower middle market to multi-billion dollar transactions for bulge-bracket
private equity clients and corporate acquirers. This represented 30% growth in limits placed over 2014.
Representations and Warranties Insurance:
R&W Insurance covers liabilities arising out of a breach
of one or more of the R&W in an M&A transaction
(including financial statements, intellectual property,
taxes, and compliance with law). Policies can be
tailored to address a client’s specific indemnity needs
on a deal, from amount of coverage to duration of
coverage to scope of loss. Unlike 10 years ago, most
insureds are now using the insurance proactively:
• Sellers: offer potential bidders an insurance policy
in lieu of the traditional 10% escrow/indemnity
cap. Sellers using this approach can maximize
net cash proceeds and minimize their post-close
indemnity risk without limiting the quality or
number of bids, as buyers can negotiate similar
(and in some facets better) coverage from the
insurance markets as from sellers.
• Buyers: incorporate insurance into a bid, reducing
seller’s indemnity obligation, and then insuring
up to a more market level (10%-20% of deal size
or more). This approach is effective in auction
scenarios or when facing a particularly risk-averse
seller (e.g., a family-owned business or late stage
fund) in a proprietary deal.
Tax Insurance: Tax Insurance covers a taxpayer for its
losses arising out of an uncertain tax position including
taxes payable, interest and penalties and gross-up
amounts for tax due on insurance proceeds. It can also
cover contest costs tied to defense of the position.
Tax insurance can benefit a seller looking to cover
its indemnity obligation for pre-close tax amounts,
or allow a buyer to insure itself against a heightened
tax issue (rather than seek a special indemnity). In
addition to deal-related tax issues, we place insurance
to protect the amount and availability of tax credits,
most frequently in the renewable energy space,
but also for historic tax credits, LIHTC and others.
We also help corporate clients use tax insurance to
manage contingent tax exposures on their books,
absent a specific transaction. Aon is regarded as the
national leader in the tax insurance space (placing
over $2B in tax insurance limits) and we assist a host
of financial sponsors and corporate clients to insure
their tax exposures. Litigation/Contingent Liability:
Aon also leads the market in placing other, more exotic
insurance products around capping litigation exposure
and other contingent risks such as successor liabilities
and one-off specific indemnities. We can work with
both traditional and specialty insurance carriers to
analyze and place any given risk.

2. Risk. Reinsurance. Human Resources.
Aon Risk Solutions
Aon Transaction Solutions
Below are case studies exemplifying some
of our successes:
#1 RW Case Study: Seller Flip to Buyer
Placement
• A US PE firm was selling a $400M manufacturer in
an auction, and the target had numerous hanging
indemnities from past divestitures, plus tax (NOLs)
and environmental issues
• Seller desired to affect the sale on an “as is” basis and
have no surviving indemnities or escrow post-closing
The Solution
• Pre-auction, Aon obtained quotes for a package
of reps and warranties, tax and environmental
insurance in favor of Buyer, and bidders were told
to work with Aon to procure insurance in place of
traditional indemnities
• The RW policy covered hanging indemnities
from past divestitures, and separate Tax and
Environmental policies were underwritten for the
heightened exposures
• Seller achieved more bids and a better sale
price than anticipated and used the pre-auction
insurance package to achieve a successful exit
#2 RW Case Study: Distinguish Bid in
an Auction
• A private equity buyer was bidding on a private
company in a very competitive auction
• Buyer expected all bids to be similar on price and
wanted to distinguish its bid without raising its
offering price
The Solution
• Aon structured principal terms of a buyer-side
RW policy prior to bid being submitted
• Buyer submitted its bid with a lower than
customary indemnification request, confident that
RW coverage could be placed excess of seller’s
cap if it won the bid
• RW Policy was included as a condition to closing
• Buyer prevailed in the auction, and seller
confirmed lower indemnity cap was key factor
#3 Tax Liability Case Study
• A foreign company sought to purchase a U.S.
manufacturing corporation from a private equity
seller. Buyer’s due diligence revealed that a prior
restructuring transaction might be taxable under
complex consolidated return regulations, despite
the Seller having received a legal opinion that the
restructuring should be a tax-free transaction. The
opinion, however, was based on assumptions that
were ultimately incorrect
• The Seller was unwilling to provide the Buyer with
a full tax indemnity
• The Buyer had 10 days remaining in its exclusivity
period (including a federal holiday) and the Seller
was unwilling to extend
The Solution
• A Tax Insurance Policy was placed within the
10 day period of exclusivity to insure the tax
liability risk as a result of the restructuring not
being treated as a tax-free transaction. Buyer
was the insured
• The Tax Insurance Policy had a $50 million limit,
a $6 million retention (equal to a Seller provided
escrow), a 5% coinsurance, and a 7 year period
#4 Successor Liability Case Study
• A foreign client secured a deal to purchase
a manufacturing plant in the US from another
foreign investor
• The product produced at the plant suffered from
historical product liability issues
• The client, despite its intent to retrofit the plant to
produce a different product using different source
materials, feared the risk tied product liability
exposure on a successor liability basis
The Solution
• Aon placed a successor liability policy for the
client covering the risk of historical product liability
exposure (on a theory of successor liability) for a
limit equal to the transaction value, and provided the
client with the comfort necessary to close the deal
Daniel Schoenberg
Managing Director
+1.212.441.2033
+1.917.361.3478
daniel.schoenberg@aon.com
Gaurav Sud
Managing Director
+1.415.486.6938
+1.917.287.7800
gaurav.sud@aon.com
Jill Kerxton
Managing Director
+1.202.570.3222
+1.301.785.9239
jill.kerxton@aon.com
Josh Halpern
Managing Director
+1.212.441.2289
+1.516.647.5780
joshua.halpern@aon.com
Stephen Davidson
Managing Director
+1.212.441.1467
+1.646.284.6646
stephen.davidson1@aon.com
Eric Ziff
Senior Vice President
+1.212.441.1428
+1.516.672.4282
eric.ziff@aon.com
Matt Wiener
Senior Vice President
+1.713.470.9794
+1.713.213.3531
matthew.wiener@aon.com
Vipul Patel
Senior Vice President
+1.312.381.7196
+1.216.570.2184
vipul.patel@aon.com
Jessica Harger
Vice President
+1.212.441.2443
+1.914.572.2422
jessica.harger@aon.com
Corey Lewis
Assistant Vice President
+1.212.479.3627
+1.347.291.4921
corey.lewis@aon.com