Insuring the Deal
The dealmaking tool that solves for known risk
Key Takeaways
Contingent risk insurance is increasingly used to transfer known legal risks—like tax exposures, IP disputes, or shareholder conflicts—out of the deal.
It’s gaining traction in mid-market M&A, not just big-cap private equity, with growing adoption in Australia across sectors like tech, energy, health, and services.
Typical use cases include IP assignment issues, unresolved litigation, ATO uncertainty, and regulatory investigations.
Policies are bespoke and require legal input. Premiums typically range from 2–10% of the insured amount.
Used well, it can unblock stalled transactions, accelerate capital raises, and de-risk exits—without holding up negotiations or leaving cash on the table.
If you’re facing a specific legal issue in a deal, ask your broker or legal adviser if it’s insurable. You might be able to solve it faster than you think.
When legal risk holds the deal hostage
In high-stakes transactions, uncertainty kills momentum. A single unresolved issue—whether it’s a regulatory query, an IP ownership gap, or a shareholder dispute—can delay or derail a deal. These aren’t abstract legal problems. They’re commercial blockers.
Contingent risk insurance offers a way forward.
It’s a product that allows buyers, sellers, and investors to transfer a specific, known legal risk to an insurer. And it’s no longer confined to billion-dollar deals or US private equity mega-funds. In the past 18 months, it’s become a real tool for the UK and US mid-market—and increasingly, for Australian founders, investors, and acquirers.
This isn’t general liability or D&O. It’s a targeted, often bespoke policy that solves for a single point of legal ambiguity. And when used well, it can unlock transactions, clean up balance sheets, or protect against messy exits.
What is contingent risk insurance?
Contingent risk insurance, sometimes called structured risk insurance, protects against the financial consequences of a clearly identified legal risk. Unlike traditional insurance, it doesn’t require uncertain or unforeseen events. The risk is already known—it just hasn’t materialised yet.
The policy steps in if that risk crystallises. If it doesn’t, it gives everyone the confidence to proceed without holding back cash, forcing renegotiations, or walking away.
What can it cover?
Common uses include:
Tax risk: historical structuring, employee classification, untested positions, or uncertain ATO treatment
Litigation: known claims with uncertain outcomes, or indemnities provided as part of a sale
M&A and restructures: ambiguity in contract clauses, restructuring steps, or past compliance
Regulatory risk: unresolved investigations or shifting legal obligations (particularly ESG, privacy, and financial services)
IP disputes: unclear ownership, contractor-developed code, or prior art claims
Shareholder fallout: co-founder exits, disputed entitlements, or blocking stakes
In every case, legal advice has already been sought. The risk is ringfenced, but not eliminated. That’s where the policy adds value.
Why it matters
For founders, contingent risk cover can:
Unblock a stalled exit
Accelerate a raise without intrusive warranties
Secure a clean break from a business or board
Navigate regulatory grey zones with confidence
For investors and buyers, it reduces the need to hold back funds, demand sweeping indemnities, or accept risk they can't price.
It’s not just about comfort. It’s about execution. In markets where delays can kill deals, speed and certainty matter.
How it plays out in practice
These scenarios are fictional but they reflect the kinds of deals, risks, and decisions we’re seeing in the market. Think of them as composites, drawn from the past 18 months of real placements across Australia, the UK, and the US mid-market.
Tax cover clears the path in a local carve-out
In late 2024, a Melbourne-based energy services firm was acquired by a UK private equity fund. A tax position relating to R&D credits claimed under previous ownership caused concern. Rather than delay the sale or restructure the deal, the parties secured a tax insurance policy that protected the buyer against ATO reassessment. The deal closed on time.
IP ownership issue resolved during US-Australia software acquisition
In early 2025, an Australian SaaS company was acquired by a US acquirer. The buyer flagged that a core piece of code had been written by a now-defunct offshore contractor. No signed assignment could be found. Rather than hold back $2 million in escrow, the buyer placed an IP title insurance policy. The acquisition proceeded with no delay or legal dispute.
Contingent litigation risk mitigated in a healthtech sale
In June 2024, a Sydney-based healthtech platform was preparing for exit when a legacy contractor lodged a claim for underpaid entitlements. The claim was speculative but couldn’t be resolved before signing. Rather than renegotiate terms, the vendor purchased a contingent litigation policy. The buyer accepted the cover in lieu of a warranty. The sale completed within six weeks.
Why now?
Several trends are pushing uptake, particularly in Australia:
More complex transactions: carve-outs, bolt-ons, and earn-outs come with legacy risks
Growing regulatory pressure: especially around privacy, employment law, and ESG disclosures
Mid-market maturation: more Australian companies reaching size and scale where minor risks carry major value impacts
Global investor exposure: offshore acquirers and funds are bringing structured tools into local deals
According to Aon, contingent risk insurance placements in APAC rose by over 60% in 2024, with Australia accounting for nearly a third of regional deal volume.
Could this be you?
Contingent risk insurance may be worth exploring if:
You’re selling a business and there’s a known regulatory or tax query
You’re buying a company with outstanding litigation or an unresolved co-founder dispute
You’re raising capital and want to neutralise an identified risk without delaying the round
You’re part of a management buyout and want clean separation from past liabilities
If any of those situations sound familiar, it’s worth asking your broker or legal adviser if the risk is insurable. Even if a policy isn’t ultimately placed, the exercise can shape better negotiations.
A note for advisers
If you're a legal, tax, or corporate finance adviser, you're often the first to spot these risks. Consider:
Flagging known, defined legal exposures during diligence
Seeking informal broker advice early on whether those exposures are potentially insurable
Factoring the potential for insurance into how you advise on structuring, indemnities, or escrow
Clients don’t always know this is an option. You can be the one who unlocks it.
What it costs (and what to expect)
Contingent risk policies are priced based on the size and nature of the exposure. Expect:
Premiums of 2–10% of the insured limit
Insured limits ranging from $1m to $100m+
Underwriting periods of 2–4 weeks, often requiring detailed legal opinions and advisor briefings
It’s not fast and it’s not cheap. But it can be the difference between a deal that dies and a deal that completes.
Final thought
Not every risk can be insured. But many more are now being insured than even a few years ago.
In the right hands, contingent risk cover is a dealmaking tool, not just a legal backstop. It adds leverage, speed, and certainty when the clock is ticking and the stakes are high.