Following a series of requests for clarification submitted by market operators, on July 25th, 2019, the Italian Insurance Supervisory Authority (IVASS) issued a statement aimed at defining the relationship between Sec. 4, Par. 2 of the IVASS Regulation No. 29/2009 and Indemnities & Warranties Insurance Policies ("I&W Insurance Policies").
The above-mentioned provision prevents Italian insurance companies – as well as Italian-based foreign insurance companies – to offer policies aimed at covering risks arising out from the reimbursement of contingent liabilities ("sopravvenienze passive") or capital losses ("minusvalenze") due to assessments resulting from M&A transactions. Nearly all primary Italian insurance companies do not currently offer buy-side I&W Insurance Policies relying on the fact that the risks covered by such policies would fall into the scope of Sec. 4, Par. 2 of the IVASS Regulation No. 29/2009.
The Italian Insurance Supervisory Authority clarified that the ban set forth by Sec. 4, Par. 2 of the IVASS Regulation No. 29/2009 does not apply to buy-side I&W Insurance Policies, if:
(a)their scope is limited to specific and definite obligations not resulting from valuations, which can allow an adequate and actuarial assessment of the risk; and
(b)the coverage size is lower than the value of the underlying deal.
That clarification will probably have a significant effect on the Italian M&A insurance market, by officially enabling also Italian insurance companies to offer buy-side I&W Insurance Policies.