Cléa Liquard's commentary was included in a Law360 article about an anticipated increase in the demand for representations and warranties insurance or other specialized insurance to protect against losses in secondaries deals. The publication noted that insurers were initially unsure of the level of diligence associated with secondaries transactions. According to the article, "this is because for traditional M&A, the due diligence process is much more rigorous than in a secondaries transaction, since the latter does not involve an actual change of control."
"There was a bit of a mismatch because underwriters were expecting to rely on this large volume of diligence and reams of information that they were used to in the standard M&A context. That's not how secondary transactions work," Cléa said.
As insurers have become more familiar with secondaries transactions, however, they have adapted their expectations and underwriting to the nature of such deals. Because of this, insurers have become more comfortable with secondaries transactions and the level of diligence involved, which has resulted in the decrease in the pricing of such insurance.
"Insurers are finding that there's a new market to tap, which is working to their benefit," Cléa expressed, "and of course to the benefit of the transacting parties."
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