Tax insurance allows parties to protect against the risk of an adverse tax ruling that may impact the value of a transaction, a tax equity position or earnings.
Policies are widely used in M&A where there is debate between buyer and seller over indemnification in respect of a tax uncertainty.
By transferring the tax risk to a third-party insurer, the deal teams can move ahead with the transaction, having taken a key point of negotiation off the table.
More frequently, tax insurance is also used in other contexts, such as corporate reorganisations, financing and refinancing structures and fund wind-ups or distributions.
This type of insurance has become a very sophisticated and flexible solution to M&A tax risk.
Please contact us if you require more details about tax insurance.