A merger and acquisition transaction consists of several stages. Due diligence is among the most time-consuming periods. A company audit involves a full review, which will help to identify the strengths and weaknesses of the organization. In the course of this procedure, the parties make efforts to identify risks and find solutions. One of the areas requiring due attention is the target’s liability and insurance. To do this work efficiently, the parties need to know the specifics of the examination.
The Insurance Due Diligence specifics
You can learn about coverage and the fairness of insurance premiums. Some CEOs scrutinize policies without paying attention to the fine print, for example. That is where some exceptions are sometimes specified.
The due diligence team also looks into claims, including pending ones. That makes it possible to figure out how one or another insurer approached the problem. The team also learns about the issues that demand assistance from the insurance company.
Identifying the reasons for litigation and investigating the potential costs are other benefits of the claims process.
During the check, the buyer:
- identifies the risks that are subject to insurance
- determines the insurance purchasing strategy
- establishes the cost of insurance
- evaluates insurance claims records
An essential part of a successful due diligence process is quality preparation. On the following pages, you can study the document checklist to be ready in advance. While this is one of the best listings on the web, it’s free.
After reviewing, consult with a lawyer or other assistant. Sometimes you need additional advice and corrections from professionals specifically for your transaction.
Description of all policies related to property insurance, employee compensation, automobile, general liability, and umbrella insurance. The company indicates:
- insurance company name
- annual fee
- claims for the last three years
- SIR, co-payment, or deductible
- occurrence or claims-made policy
Examining the impact of a transaction on coverage is a crucial step. Otherwise, the risks are not covered after the process completes. Changes in an organization’s insurance or cancellations sometimes happen. That could be due to a change in ownership or restructuring.