6. ביטוח לעסקאות מיזוג ורכישה

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AIGישראל

+

1997 2002 2006

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AIG ישראלFacts & Figures

הינה ישות משפטית עצמאית מפוקחת

400,000

מיליון 700₪כ-

מיליון 56₪כ-

מיליון 375₪כ-

מיליון 29₪כ-

ישראלAIGפוליסות ביטוח בתוקף ב-

2010מחזור הפרמיה השנתי בשנת

2010סך הרווח הנקי בשנת

(31.12.10)נכון ליום סך ההון העצמי

סך עודף ההון העצמי מעבר לדרישות הפיקוח(31.12.10)נכון ליום

AIGישראל

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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

o 4 major regions: U.S. and Canada, Europe, Far East, Growth Economies

o 9,000 claims professionals worldwide

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Chartis Overview

o History: 90 years of underwriting experience

o Truly Global: 48% of premiums written outside of the U.S. and Canada

o Diversified: 62% commercial and 38% consumer

o Experienced: average senior management tenure = 20 years

o Innovative: over 200 new products and services launched in 2010

o Strength: 43,000 employees worldwide

Chartis 2010 NPW: $33.4BN2010 NPW by Geography

2010 NPW by Business Segment

Chartis is a global P&C market leader with over $33 billion in 2010 NPW1

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Introduction to Warranty and Indemnity Insurance

Mergers & Acquisitions Insurance Group

Andrew Graham & Janine Fenwick

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Agenda

• Who we are• What is Warranty and Indemnity Insurance?• Insurance Process

Coverage & exclusions What the Insurer needs

• Claims

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Introduction – who are we? Largest, longest established and most experienced team in the

global transactional insurance market;

Provide bespoke insurance solutions for transactions -

Warranty & Indemnity.

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;

We have global capacity with offices in over 130 countries;

and

Globally over the past 12 months we have placed insurance on

in excess of 160 transactions (ex North America) in 28

different jurisdictions.

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What is Warranty & Indemnity Insurance?• We insure loss arising from breaches of the warranties

or indemnities given by the seller in an acquisition.• We can insure either the buyer or the seller. • We insure either:

• share sales )assets and liabilities( - extensive warranties• asset sale only - more limited warranties

• Premiums are generally 1.5% to 3% of the limit )subject to minimum premium of USD75K(.

• The policy will generally take a minimum of five working days to underwrite and bind from receipt of all requisite information and documentation.

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Seller’s

risk

Buyer’s

risk

Policy of indemnity

Insurance

policy

Sale & Purchase Agreement

Limitation of liability for breach

of warranty under the

SPA

Transaction value

Policy limit

•Insured: The warrantors

•Objective: To provide coverage in the event that the buyer sues the seller for a breach of warranty or indemnity

•Structure: Can insure up to the warranty cap as defined by the sale document

•Policy of indemnity: Seller still retains liability under sale document, therefore is liable for any breach not picked up by the insurance policy

Sell – Side Policy

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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)

•Insured: The buyer

•Objective: To provide coverage against financial loss suffered as a result of a breach of the seller’s warranties

•Structure: Warrantors give warranties but these are capped at a lower amount, the insurance policy sits in excess of this

•First party policy: Policy is independent of the seller, therefore the buyer is entitled to make a claim directly against the policy

Buy - Side Policy

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Motivations for InsuranceSeller Side

• Sellers unwilling or unable to give financial support behind warranties

e.g. secondary buy-outs, acquisition from insolvent sellers;

• Reluctance of sellers to retain proceeds in escrow;

• Optimising a “clean” exit;

• Sale under a turnaround situation.

Buyer Side

• Investing in new or unfamiliar jurisdictions or industry sectors;

• Enhancing bidder status;

• Alternative to contractual recourse for a particular issue;

• Best practice risk management / corporate governance;

• Comfort to debt finance providers.

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W&I Insurance - Policy Cover

Bespoke policy tailored to the transaction

Back-to-back with the SPA –Covering breach of insured warranties - aim for full cover

–Duration matches survival period under SPA at a minimum

–Matching de minimis/thresholds under SPA

Covering defence costs

Covering fraud by the seller on a buyer-side policy

No requirement to pursue the seller before claiming under the policy on a buyer-side policy

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W&I Insurance – the policy exclusions

✗ Known issues )i.e. matters in the disclosure letter/buyer’s due diligence(

✗ Completion account adjustments

✗ Fines and penalties to the extent they are uninsurable by law

✗ Fraud by the seller on a seller-side policy

✗ Forward-looking warranties

✗ Potentially transaction specific issues

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Submission – what we need to seea(Details of the Buyer and Seller

b(Details of the Target business

c(Transaction value

d(Limit of indemnity sought - Chartis capacity up to USD60,000,000

e(Retention insured is prepared to accept - N.B market standard is 1% of transaction value

f(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.

g(Estimated signing or completion date of the transaction

h(Attach the following documents:a( SPA

b( Disclosure Letter

c( Tax Covenant/Deed )if there is one(

d( Due diligence )not always available on Seller side(

e( Data room index

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Underwriting process

Day 1Initial submission

Internal review

Heads of terms

Engagement letter

Detailed underwriting

Negotiate cover

Binding policy

Policyreview

Deal Signs

Ideally this will be about 14 days, but is has been between 2

days and18 months

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Underwriting Considerations

Identity of the buyer and seller and their advisors

Target business and location

Quality of the transaction process

Value of transaction

Scope of the insured warranties - buyer or seller friendly?

Seller’s liability under the SPA

Gap between signing and completion?

Why do they want insurance?

Do both parties know about insurance?

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Claims: Warranties alleged to have been breached

A majority of alleged breaches relate to financial statements warranties

IP9%

Financial Statements

32%

Tax28%

Environmental6%

Multiple25%

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Claims ScenariosPatent Infringement

– 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

– Chartis paid USD1.5million in settlement and expenses to resolve the claim

Multiple Breaches– 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.

– 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

Change of Control– Buyer-side policy relating to a breach of the warranties relating to change of

control and contractual arrangements with key customers. Seller was fraudulent.

– 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.

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Any questions

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You can find further information about our M&A Insurance Group and our products on our homepage

http://www.chartisinsurance.com/_911_217012.html

Please feel free to contact us to discuss any questions you may have about our products.

Andrew Graham Janine FenwickEuropean Manager Growth Economies Tel: +44 20 7954 8558 Tel: +44 20 7954 8840 [email protected] [email protected]

Mergers & Acquisitions Insurance Group

Chartis Europe Limited