Warranty and Indemnity insurance was for years a tool reserved for large cap PE transactions. That has changed. In Belgian mid market deals, W&I is now a recurring option on the negotiation table, pushed by sellers looking for clean exits and accepted by buyers who want recourse without chasing a former owner. The economics have improved, but W&I is not automatic. Below a certain deal size and above certain risk profiles, the premium does not pay for itself.

What W&I insurance actually covers

A W&I policy transfers the financial consequences of a breach of representations and warranties from the seller to an insurer. If a warranty proves false after closing, the buyer claims against the policy rather than against the seller directly. The seller's economic exposure is reduced to the retention, or deductible, which is typically set between 0.5% and 1% of enterprise value.

Two structures exist. Buy side policies are the European market standard and cover the buyer directly. Sell side policies exist but are rarer, and cover the seller's liability under the SPA. In Belgium, buy side is the default.

Premium ranges and deal size thresholds

In the mandates we run in the Belgian mid market, premiums have compressed significantly over the last five years. On a clean industrial or services deal we see premiums between 0.8% and 1.5% of the insured limit, with the limit usually set between 15% and 30% of enterprise value. Insurers apply minimum premiums, which is why we rarely find W&I economic below an enterprise value of 15 to 20 million euros.

Above 50 million in enterprise value, W&I is close to standard. Between 20 and 50 million, it becomes a case by case decision driven by deal complexity, risk appetite, and the seller's profile.

What the policy typically excludes

W&I does not cover everything the SPA covers. Standard exclusions include known issues flagged in due diligence, fraud and criminal acts, transfer pricing, forward looking statements, and specific environmental or product liability risks. Pension underfunding, secondary tax liability, and certain regulatory breaches are also frequently excluded or only available as specific enhancements at extra premium.

The consequence is operational. A W&I policy is not a substitute for due diligence. Insurers require a robust due diligence process as a precondition to underwriting.

When W&I makes sense and when it does not

W&I works well when the seller is an individual or a family shareholder looking for a clean exit without keeping capital tied up in escrow for two years. It also works when multiple sellers would otherwise need to provide joint and several warranties. And it works when the buyer wants the warranties package to be worth something regardless of the seller's future solvency.

W&I does not work well when the transaction is small, when due diligence is light or rushed, when known issues make up a large part of the risk profile, or when the seller is a strategic corporate that will stand behind its warranties without concern.

The dups approach

At dups, we treat W&I as a tool, not a default. On every sell side mandate above the mid market threshold, we assess whether W&I structurally improves the deal for our client, and we coordinate with brokers and insurers early enough to avoid last minute pricing surprises. On buy side mandates, we use W&I to turn a warranty package into actual protection, not just contractual language. If you are weighing whether W&I is worth it on your next transaction, let us talk.