Environmental Risk Managers, Inc. (ERMI) has announced a new product to address exposures related to business & property transactions. The Mergers, Acquisitions, and Pollution Protection (MAPP) product combines representations & warranties (R&W) insurance with pollution liability insurance.
R&W insurance is designed to provide coverage for the breach of a representation or a warranty contained in a buy/sell agreement, in addition to, or as a replacement for all or most of the seller’s contractual representations and warranties.
According to Brooks Bunbury, vice president of ERMI, there is a growing need for a combined product to address the environmental and transactional exposures created via indemnifications in standard buy/sell agreements.
“Over the last decade we have seen a steady increase in the number of M&A deals which require pollution liability insurance for deals to close. Over this same time, we have seen a growing interest in incorporating R&W insurance into M&A transactions as well. As a general rule, R&W policies exclude coverage for pollution,” Bunbury said. “At the end of the day, all sides of the deal want a clean transaction.”
ERMI now offers R&W, tax liability, and pollution liability insurance individually, or combined in a package to allow all parties to go their separate ways while reducing the risk of un-forecasted liabilities arising from the transaction, Bunbury said.
“Due to the complexity and depth of indemnifications in most transactions, there’s a strong likelihood of a breach of the R&W’s or environmental at some point after closing. In fact, insurance industry data has revealed that one out of every four M&A deals has at least one claim of a breach of the reps and warranties, add to this environmental and you begin to understand how exposed M&A’s can be,” Bunbury said. “If there’s no pre-determined financial assurance mechanisms in place, there’s always the risk that the seller indemnifications may not be worth the paper they’re written on.”
Environmental Risk Managers, based in Leland, Michigan was founded in 1992 as a specialty Environmental Liability Insurance wholesaler.
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