Deal Point: A US investor is in the process of negotiating the purchase of a middle market industrial company in central Europe. The proposed transaction will be the investor’s first investment outside of the US. While significant due diligence has been done with the assistance of experienced local professional advisors, the investor continues to have a concern with the country’s taxation system. The entire transaction size is $100,000,000 but the investor has asked that the tax representations be supported by a $20,000,000 indemnity. The potential seller is only willing to provide a $5,000,000 indemnity to support all representations and warranties, including the tax representations.

Transactional Insurance Solution: The investor purchases a Reps & Warranties Insurance policy solely designed to respond to breaches of the representations that relate to tax matters in the amount of $20,000,000. The policy will respond in excess of any available recoveries under the $5,000,000 indemnity that the seller has agreed to provide.