Matrix helps its M&A clients to unlock value and enable transactions by insuring contingent risks. A contingent risk is any known legal risk that could have a negative impact on a company or specific assets value.
Contingent Risk Insurance (CRI) is often the most appropriate solution for low probability but high value exposures. This is because the buyer can access a much larger indemnity limit and achieve complete risk transfer without tying up capital (escrow, indemnity or parent guarantee) or paying high rates for third-party security.
Driven by private equity investors, the CRI market has allowed for creative balance sheet management in order to access capital, lending and improved valuations.
Funds and Corporates are reducing administrative costs by efficiently winding up portfolio companies or preparing targets for sale, by packaging known risks into a consolidated CRI programme.
Corporates are also realising the benefits of insuring against known, uncertain legal risks, by allowing CRI to feature in securities offering documents, as a way of enhancing and underpinning value.
Contingent Risk Insurance is used in 3 relevant scenarios:
- Uncertain future event (legal or non-legal)
- Legal nexus (legal right, contract or dispute)
- Monetary loss
Whilst legal and expert opinions are useful, Insurers will now carry out their own analysis of the underlying facts based on:-
- Quantum: the highest potential liability and how this quantum was reached
- Access to information: each risk is underwritten based on the underlying facts
Matrix help our M&A, Private Equity and Corporate clients to structure, present to the insurance market, and then negotiate and place, Contingent Risks Insurance across a wide range of industries, risks and territories.