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M&a Insurance Due Diligence Checklist
M&a Insurance Due Diligence Checklist
Review insurance company claim Copies of the actual loss runs are preferred,
reports – or "loss runs" because they are primary sources of
information about the seller’s risks and
9 How many product liability losses financial obligations -- even if they show few
have they incurred -- and how or no claims. Use the loss runs to develop
high or severe have they been? questions about large or unusual claims and
9 If a provider of professional losses.
services, how many errors &
omissions claims have they had If the company incurs enough claims, you
and how severe? should prepare to do some loss-trending,
9 How many workers compensation especially of the workers compensation
accidents do they incur annually? claims.
9 How many automobile and
general liability accidents do they Secondary sources include compiled loss
incur? statistics, often prepared by the seller’s risk
9 Have they had any material manager or broker, or projections prepared
property, crime, cargo and marine by a casualty actuary. Ask if these are
claims. available.
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Get a copy of the seller’s Often the data room will only have the
insurance policy schedules dating current schedule of insurance. Always ask for
back at least three years and get prior years' schedules and complete copies of
copies of all property/casualty each current insurance contract -- and READ
insurance policies currently in THEM!
force.
Look for…
The Schedules of Insurance should list
the following for each policy: 9 Inadequate umbrella limits
9 Claims-made policy forms.
9 What did/does the policy cover 9 No management liability policies (D&O,
(e.g. commercial property)? EPLI, ERISA)
9 Who was/is the insurance 9 Insurance companies with AM Best Ratings
Company? less than "excellent."
9 What were/are the policy 9 Expired policies (or policies due to expire
numbers? before closing)
9 When did/will they expire? 9 Gaps or lapses in insurance coverage.
9 What were/are the per occurrence
and aggregate limits of liability? Make a table summarizing their premium
9 What were/are the insured values history. Calculate the cost of insurance per
for real and personal property and $1,000 of revenues and submit to the RIMS
business interruption? Benchmarking Survey.TM
9 What were/are the deductibles or
self-insured retentions?
9 What were/are the annual
premiums?