The Hindu Business Line : Transaction risk cover in demand: Marsh India

Marsh, a global insurance solutions provider, is witnessing an increasing demand from its Indian corporate and private equity clients for ‘Reps and Warranties Insurance’ and ‘Tax opinion liability insurance’, according to Mr Sanjay Kedia, Country Head and Chief Executive Officer, Marsh India.

The two insurance products help clients mitigate ‘transaction risk’ in an event of a merger and acquisition.

Though a ‘reps and warranties’ insurance cover is offered in India, ‘tax opinion’ products have not yet made their Indian debut.

With a tax opinion liability insurance product, the insurer gets the benefit to reduce/eliminate future tax liabilities up to the insurance coverage limit. A Representations and Warranties insurance product is taken out in case of a corporate transaction (like an M&A transaction) where the buyer relies on certain assurances from the seller, and then takes out insurance coverage to manage the risk of the seller not following up on those assurances.

This need to manage M&A transaction risks in India comes in the backdrop of a recent incident where the Government of India decided to slap a claim for unpaid capital taxes of Rs 9,000 crore on Vodaphone for its blockbuster purchase of Hutchison.

Insurance industry experts however feel that the market is still shallow for transaction risk insurance products.

“These insurance products are sophisticated and more commonly used in developed jurisdictions; it is going to take more time before these products gain traction in India,” according to an insurance law expert.

Tata AIG General Insurance provides representations and warranties cover but has not seen a very good response from companies.

“The interest has been less. There are not many companies that are willing to take it,” said Mr Gaurav Garg, CEO and Managing Director, Tata AIG.

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