Merger and Acquisition Insurance Considerations
February 4, 2026
Explore key insurance considerations to mitigate risks in merger and acquisition transactions.
Explore key insurance considerations to mitigate risks in merger and acquisition transactions.
The college football season has ended, and along with it, the heightened craze of the transfer portal. Student athletes from all over the country carefully evaluated their options within a small window to ensure they made the best decision for themselves regarding not only their football careers, but also their education and personal lives. Coaches also gambled within the transfer portal to ensure they added the right players to their team for the chance to come out on top next season.
Just as athletes and coaches evaluate risks, opportunities, and long-term implications before making a switch, businesses entering a merger or acquisition (M&A) must do the same. The decisions made during this process can shape the future of the combined organization for years to come. While financial, legal, and operational due diligence are usually the main priorities, I believe insurance due diligence is equally critical and can be overlooked. A failure to properly evaluate merger and acquisition insurance programs can leave the newly formed entity exposed to costly, unexpected liabilities. It is important to have a relationship with a trusted broker who can get involved as soon as possible.
When one company merges with or acquires another, the risk landscape changes immediately. Each organization brings its own history, exposures, and contractual obligations. To avoid hidden liabilities, buyers must conduct a thorough insurance review as part of their process.
Here are four steps to include in your comprehensive review:
Buyers should confirm that the seller’s insurance policies have adequate limits and appropriate coverage for the company’s primary risks. This includes general liability, property, auto, workers’ compensation, umbrella/excess liability, cyber liability, and any industry-specific policies. Insufficient limits or outdated coverage can leave the buyer responsible for losses that occur after the transaction.
Buyers also need to understand how policies will respond in the event of an ownership change. At closing, both parties need clarity on the actions taken to protect the newly acquired entity while ensuring continued coverage for the selling entity.
A review of the seller’s claims history and policy documents can reveal gaps in coverage. For example, a company may have had prior claims denied due to exclusions, or it may have emerging risks, such as cyber exposures, that were never insured. Understanding these potential risks allows the buyer to make an informed decision. They will also be able to understand what claims may still be open for the seller and what deductible/retention they could be responsible for after closing.
Purchasing another company will likely impact the Buyers Experience Mod for 3 years. Your broker will need to review the Workers Compensation Audits and Losses to understand what exposure and losses will be added to the Buyers Mod and the potential premium impact or ability to bid on projects if it increases to over 1.00. There are circumstances where the Buyers Mod will not be impacted. Involving your broker right away will help answer those questions.
If the merger or acquisition involves expanding into new states, adding new operations, or integrating unfamiliar processes, new exposures may arise. Buyers may need to purchase new policies or modify existing ones to ensure these operations are fully covered.
The goal of the merger and acquisition insurance review is not only to help the buyer feel comfortable with the purchase, but also to put together a transition plan if the sale goes through.
Buyer and seller’s insurance representatives will need to coordinate on what changes should be made, such as:
During a merger and acquisition transaction, both parties make representations and warranties statements about the company’s financials, operations, legal compliance, and other critical matters. If these statements turn out to be inaccurate, the resulting liabilities can be significant. Traditional insurance policies typically do not cover these types of breaches.
Representations and Warranties Insurance fills this gap by protecting both buyers and sellers from financial losses arising from inaccuracies made during the transaction.
Mergers and acquisitions are complex undertakings that require careful planning and review; a critical part of that process is insurance coverage review. By evaluating existing policies, identifying gaps, and securing coverage such as Representations and Warranties Insurance and/or Run‑off Coverage, companies can protect themselves from unforeseen liabilities and move forward with confidence.
For organizations preparing for a merger and acquisition transaction, partnering with an experienced insurance broker is essential to navigate these complex arrangements. The right guidance ensures that both parties understand how their policies will respond to a change in control and that the combined company is protected from future claims.
