From Niche Product to Strategic Deal Tool

What was once a specialist insurance product has become a mainstream transaction tool, enabling parties to bridge divergent expectations on post-closing liability while facilitating cleaner exits, preserving commercial relationships and delivering greater deal certainty. By replacing negotiations around indemnity caps, survival periods and escrow arrangements with an insurance-backed recourse mechanism, W&I insurance has streamlined transaction execution and become a key feature of sophisticated M&A structuring.

This shift is evident across the Asia-Pacific region, where over 95% of W&I policies are buy-side policies and the “sell-buy flip” has become commonplace, particularly in competitive auctions^[2]. These trends are now embedded in India, where W&I insurance is relied upon by private equity investors, strategic acquirers and Indian corporates alike.

Regulatory Tailwinds

The evolution of India’s W&I market has been supported by progressive regulatory reforms. A key development is the increase in the foreign direct investment (“FDI“) cap in the insurance sector from 74% to 100%, announced in the Union Budget 2025^[3]. This liberalised regime is expected to attract greater foreign participation, expand underwriting capacity, improve policy limits and foster competitive pricing, accelerating adoption of transactional risk insurance across Indian M&A.

The continued evolution of India’s reinsurance framework^[4] has also strengthened the market. Insurance Regulatory and Development Authority (IRDAI)’s enhanced collateral requirements for Cross Border Reinsurers (CBRs) are expected to improve reinsurance security and support higher policy limits for complex transactions.

Emerging Coverage Areas

Perhaps the clearest indicator of Indian W&I market maturity is not merely the increase in policy placements, but the steady expansion of insurable risks. Areas once routinely excluded or regarded as “hard no” underwriting positions are now increasingly subject to nuanced underwriting, reflecting greater insurer familiarity with Indian regulatory frameworks, improved due diligence quality and accumulated local claims experience.

1. Anti-Bribery and Anti-Corruption: ABAC remains one of the most sensitive underwriting areas in Indian W&I transactions. Insurers expect comprehensive compliance diligence, including management background checks, review of historical investigations and evidence of a robust compliance programme. While policies typically begin with an ABAC exclusion, underwriters are increasingly willing to narrow or remove it where diligence demonstrates a strong compliance and no material red flags. Where coverage is provided, it is generally limited to specific warranty breaches relating to compliance policies, training, books and records, and the absence of unlawful payments, while known issues and ongoing investigations remain excluded.
2. Stamp Duty: Historic stamp duty exposures continue to be excluded from W&I coverage owing to India’s fragmented, state-specific stamping regime, while stamp duty on transaction documents is treated as a deal cost. However, underwriters are increasingly willing to consider limited cover where supported by legal analysis on adequacy of stamping or registration and a clean compliance history. In some transactions, insurers have introduced a materiality qualifier by limiting the warranty to adequately stamped “material contracts” rather than all contracts.

3. Anti-Trust Compliance: Increased enforcement by the Competition Commission of India (“CCI“), particularly regarding gun-jumping, merger notification and cartel conduct, has made competition law a key underwriting focus. Insurers are scrutinising warranties relating to compliance with the Competition Act, 2002, including merger filings, standstill obligations and absence of ongoing investigations.

4. Tax Risks: Tax insurance remains one of the fastest evolving areas within India’s transactional risk insurance market. While historically focused on treaty entitlement and withholding tax risks, insurers are increasingly evaluating more complex exposures, including Principal Purpose Test analyses, Multilateral Instrument considerations, transfer pricing and capital gains tax risks. Recent judicial developments, including the Tiger Global ruling, have sharpened underwriting focus on treaty protection, substance requirements and offshore investment structures.

5. Data Protection and Cyber Risk. With the enactment of the Digital Personal Data Protection Act, 2023 and notification of the Digital Personal Data Protection Rules, 2025, data protection is increasingly becoming a forward-looking warranty area in Indian share purchase agreements. W&I policy terms now include reduced exclusions for risks typically covered by operational insurance, including cyber risk.
6. VDR Scrape and Disclosure Quality: Underwriters are sensitive to disclosure quality and virtual data room (“VDR”) management, as data-room scrapes and due diligence report negotiations have become more common in Indian W&I placements. Insurers expect an organized, time-stamped VDR, detailed disclosures and due diligence reports that clearly state what was reviewed and scope limitations.

The Road Ahead

The Indian W&I market is entering its next phase, characterised by sophisticated underwriting, product innovation and broader adoption. While insurers demonstrate appetite for sectors with straightforward regulatory frameworks, underwriting is becoming granular and diligence-driven. Even heavily regulated sectors are witnessing greater underwriting engagement where supported by robust diligence.

Looking ahead, sustained M&A activity, increasing private equity exits, cross-border investment and a liberalised insurance regime are expected to accelerate demand for transactional risk insurance. The market is already expanding beyond traditional sponsor-led buyouts into strategic acquisitions, founder-led exits, secondary transactions and mid-market deals, reflecting growing acceptance among Indian corporates and strategic investors.

Footnote

[1] Economic Times, India’s M&A deal value reaches $60.2 billion in 2025, BFSI adds the largest share. Available at: https://bfsi.economictimes.indiatimes.com/articles/indias-ma-boom-602-billion-deal-value-in-2025-bfsi-sector-leads/127155058.

[2] Lockton, Transaction Liability Market Update 2025. Available at: https://lockbox.lockton.com/m/1ce1762e459a26de/original/Lockton-Transaction-Liability-Market-Update-2025.pdf.

[3] Ministry of Finance, Government of India, Press Information Bureau, February 1, 2025. Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2098394.

[4] Master Circular on Insurance Regulatory and Development Authority of India (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 and Insurance Regulatory and Development Authority of India (Re-insurance) Regulations, 2018. Available at https://irdai.gov.in/document-detail?documentId=4974650.

This article was originally published in VCCircle on 21 August 2026 Co-written by: Harshita Srivastava, Partner; Palomita Sharma, Associate. Click here for original article

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