As M&A activity continues to accelerate in Saudi Arabia, legal certainty has become a true competitive advantage. One tool increasingly shaping that certainty is Warranty & Indemnity (W&I) insurance — not just as a financial layer, but as a legal mechanism that enhances deal clarity, reduces execution risk, and builds trust among stakeholders.
When implemented thoughtfully, W&I insurance helps streamline transactions, simplify negotiations, and provide assurance on both sides of the table.
Reducing Risk and Increasing Legal Certainty
W&I insurance gives sellers a cleaner exit by limiting post-closing liability, often eliminating the need for complex escrow arrangements or drawn-out indemnity clauses. Buyers, on the other hand, can shift specific risks to an insurer — a powerful advantage in competitive or auction-driven deals.
This approach is already common across Europe and the Middle East, where over 70% of private equity deals include W&I coverage. In Saudi Arabia, it’s gaining traction as deal structures become more sophisticated and sector-specific regulations play a bigger role in shaping execution timelines.
A Clear Regulatory Framework in Saudi Arabia
Saudi Arabia offers a well-defined legal and regulatory backdrop for W&I insurance. Key foundations include:
– The Cooperative Insurance Companies Control Law (2003) and its Implementing Regulations
– The Saudi Central Bank (SAMA), which oversees insurance policies and claims processes
– The new Insurance Authority (launched in 2023), which centralizes supervision aligned with Vision 2030
– The Saudi Civil Code (effective May 2021), which clarifies legal terms like gross negligence, liability, and enforceability
Due Diligence: The Core of Effective Coverage
W&I coverage hinges on the depth and clarity of legal due diligence. Insurers don’t underwrite based on assumptions — only on what’s documented and disclosed. That makes the legal team’s role absolutely central to shaping the risk profile.
Insurers typically focus on:
– Chain of title and asset ownership
– Licensing, regulatory, and contractual compliance
– Tax, labor, or environmental liabilities
– Disclosed disputes, claims, or unresolved risks
Thorough, well-documented diligence tends to result in broader coverage and better terms. Gaps or vague disclosures can lead to carve-outs and reduced recoverability — even when insurance is technically in place.
Aligning the SPA with the Policy
W&I insurance isn’t a plug-and-play solution. Its real value comes when it’s carefully integrated into the deal structure — especially the Share Purchase Agreement (SPA).
For maximum effectiveness, legal teams should coordinate on:
– Definitions – Ensure key terms match across the SPA and policy
– Timeframes – Align limitation periods, notification deadlines, and claim windows
– Claims process – Clearly define triggers and procedures for breach claims
– Fallback protections – Add indemnities for known exclusions or specific risks
Why It Matters More in Today’s Saudi Market
As Saudi Arabia’s M&A market matures, W&I insurance is becoming especially relevant in deals involving sovereign funds, institutional investors, or regulatory approvals. It helps accelerate closings, reduce uncertainty, and improve enforceability — particularly in cross-border or regulated-sector transactions.
That said, W&I is not a substitute for legal due diligence or sound deal architecture. It’s a complement — one that adds clarity, confidence, and flexibility.
Practical Checklist for Success
– Engage legal counsel early
– Conduct full-scope legal due diligence
– Disclose with structure and clarity
– Review exclusions up front
– Align terms across documents
– Plan for post-closing claims
Final Thought
W&I insurance is more than a financial product — it’s a legal instrument that, when used strategically, supports efficient and trustworthy dealmaking. In Saudi Arabia’s evolving M&A landscape, its true value lies in how precisely it aligns with regulation, legal diligence, and smart transaction design.