On March 2009 the Italian Insurance Regulator (ISVAP, at the time) issued Regulation n. 29/2009, dealing with, inter alia, insurability of certain risks (the "Regulation").
According to Art. 4, paragraph 2 of such Regulation "...In any case the insurance undertaking may not provide cover guaranteeing the reimbursement of contingent liabilities or losses on assets due to assessments resulting from undertaking's extraordinary operations" ("In ogni caso non sono rilasciabili le coperture destinate a garantire il rimborso di sopravvenienze passive o minusvalenze su elementi patrimoniali derivanti da valutazioni conseguenti ad operazioni straordinarie di impresa").
Following enquiries from the market in relation to the possible impact of such provision on W&I policies, on 25 July 2019 the Italian Regulator (IVASS) issued a FAQ statement aimed at answering the question of whether "Art. 4, paragraph 2 of Regulation 29/2009 does apply to policies covering risks connected to non-conformity or breach of representation and warranties in the context of extraordinary corporate transactions (so called W&I Policies)".
IVASS confirmed the general application of the prohibition set forth by Art. 4, paragraph 2 of the Regulation on non-insurability and then – importantly – clarified that W&I policies do not fall within the scope of such provision if:
- for seller-side policies, they cover the risk arising from the seller's indemnity obligations in the event of a breach of the specific representations and warranties given by the seller to the buyer in the context of an extraordinary corporate transaction
- for buyer-side policies, they (i) are based on limited and identified commitments not deriving from valuations, (ii) refer to risks which can be adequately assessed on an actuarial basis and (iii) provide indemnity not corresponding to the consideration for the extraordinary corporate transaction.
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