CFC launches new excess insurance solution for secondary transactions

CFC, a provider of insurance solutions in emerging risks and a market leader in cyber, has launched a new excess insurance offering specifically designed for secondary transactions.

This solution introduces a new option for the secondary transaction market, offering up to USD 150 million in excess coverage.

With this, CFC now provides a total capacity of up to USD 200 million for GP-led and LP-led transactions in the US, Canada, the UK, Europe, and other select international markets.

Angus Marshall, Head of Transaction Liability at CFC, said: “CFC was the first to develop an insurance solution for secondary transactions and we have subsequently underwritten over 200 policies and insured over USD3 billion of deal value.

“A previously uninsured sector of the market, our adaptation of representations and warranties insurance to better suit these transactions has created a whole new branch of transaction liability insurance with a target addressable market of over USD 100 billion.

“Our increased limit further builds on our core secondary underwriting capabilities and is set to unlock further value in this important and growing market.”

CFC’s new solution provides excess coverage for fundamental representations and warranties, as well as indemnity for excluded obligations commonly seen in secondary transactions.

Fundamental representations refer to key legal statements made by an investment fund in a sale and purchase agreement, addressing the fund’s legal and operational status, and the interests being sold. Excluded obligations involve specific liabilities, such as those relating to tax or fiduciary duties, typically retained by the selling investor.

Secondary transactions, which often involve complex negotiations between investors to allocate risk, were previously uninsured, leaving selling investors liable for certain risks linked to their interests in the investment fund. This included risks from breaches of representations or claims regarding excluded obligations.

“We’re excited to introduce this comprehensive solution for secondary transactions, which further augments our leadership in this important, emerging part of the transaction liability market,” further added Marshall.

“At CFC, we understand the unique challenges and risks involved in these deals and with an increased limit size, we continue to provide innovative, relevant and dynamic solutions for investors undertaking secondary transactions.”

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