Warranty exclusion & W&I insurance

The insolvency administrator owes the estate a duty of careful realisation, but has little personal incentive — and usually no economic basis — to give the buyer far-reaching warranties: once distributed, the estate is effectively judgment-proof. Insolvency purchase agreements therefore typically exclude defect and title warranties broadly, limiting themselves to core representations (ownership, authority to dispose, no known litigation).

W&I (Warranty & Indemnity) insurance shifts the risk of inaccurate seller representations onto a specialist insurer, who pays the buyer directly if a warranty proves false — regardless of the seller's solvency. For insolvency-specific deals the market is narrower than for regular M&A: insurers require a solid due-diligence basis that compressed insolvency timelines often can't deliver, and frequently exclude or specially price insolvency-specific risks (e.g. claw-back/avoidance actions, § 613a employee transfers).

For buyers, the decision needs to be made early: even on an expedited basis, a broker-led W&I process takes two to four weeks running in parallel with negotiations. Without W&I cover the residual risk simply sits with the buyer — which should be reflected in price, in the depth of the buyer's own due diligence, or in the agreed purchase-price holdback.