By Kim Bo-eun
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This is based on expectations that the role of PEFs and the demand for W&I insurance will grow further in the market, based on recent revisions to related regulations that allowed venture capital firms to establish PEFs.
W&I Insurance, also referred to as "M&A insurance," covers potential risks for buyers and sellers involved in M&A deals.
The policy indemnifies the insured for losses resulting from breaches of warranty in a number of contract areas, such as financial statements, taxation and employment.
According to AIG's Asia Pacific data for 2018, one out of every five W&I policies has been claimed. Claims increased to 26 percent for deals reached between $500 million (6.08 billion won) and $1 billion. In 2016, one out of every seven W&I policies had been claimed.
Claims valued over $10 million doubled as a proportion of material claims, from 8 to 15 percent, at an average cost of $19 million.
AIG Korea has a maximum capacity of 100 billion won per transaction, with insurance premiums and compensation limits determined based on the size of the M&A transaction.
"We have dedicated local underwriting and claims teams across the globe, which makes AIG uniquely based to underwrite transactions quickly and efficiently," said Moon Jin-seung, head of AIG Korea's financial lines.
"For PEFs where retrieving the investment and exit are essential, W&I Insurance can be efficiently used to mitigate long-lasting legal risks and plan a successful exit. AIG's unique experience and expertise will help M&A participants complete their deals successfully."
