W&I Insurance In Egyptian M&A

Warranty and Indemnity ("W&I") insurance has become a well-established feature of global M&A practice, providing an effective means for allocating transactional risk between parties and insurers. In the Middle East, the product first gained traction in the United Arab Emirates and has since begun to appear selectively in Egyptian transactions. While W&I insurance is not yet a regular component of local M&A practice, its potential value is increasingly recognised, especially in cross-border and large-cap deals involving international investors and an Egyptian component.

According to PwC's TransAct Middle East 2025 Mid-Year Update, the region recorded 271 announced deals in the first half of 2025, indicating a 19 percent increase on the prior year, with Egypt nearly doubling its tally to 86 transactions. Such momentum, driven by cross-border activity, has raised the relevance of risk-transfer tools such as W&I insurance, particularly where foreign buyers seek contractual certainty in an evolving market. As the market deepens and international participation expands, it is timely to consider how W&I insurance might fit into Egypt's developing transactional toolkit.

From Global Practice to Regional Adaptation

Commercially, W&I insurance transfers the seller's warranty and indemnity exposure to an insurer, giving the buyer recourse against a credit-rated counterparty. This gives the buyer greater certainty of recovery in the event of a claim, while allowing the seller a clean exit without extended escrow or holdback arrangements. Typically, the buyer arranges the W&I policy; however, in mature markets such as the United Kingdom, "sell-side flips" are increasingly common, where the seller secures indicative terms for a buyer-side policy to enhance bid competitiveness. The same dynamic is now visible in the Gulf.

Across the Middle East, W&I is now a regular feature of transaction planning. According to Lockton's transactional risk team, the product is "discussed, if not necessarily used, on the majority of M&A transactions" in the region, with insurer appetite determined largely by the standard of documentation and the scope of due diligence.¹ Its commercial appeal lies in its ability to facilitate competitive auction processes and to accelerate capital recycling for private equity sponsors by providing sellers with a clean exit.² Market data from leading brokers show that premiums in the Middle East typically range between 1 and 2 percent of the policy limit, slightly higher than the 0.9 to 1.2 percent range common in Europe. Although premiums in the Middle East are marginally higher than in Europe, that cost is often balanced by the ability to dispense with large escrow arrangements, an especially valuable saving in today's high-interest environment.³

Understanding W&I Insurance in Context

As mentioned above, W&I insurance is an established mechanism for transferring warranty and indemnity risks from the seller to an insurer, but its integration into any jurisdiction depends on local legal and market conditions. Under Egyptian law, warranties and indemnities in share purchase agreements are treated as contractual obligations governed primarily by the Civil Code, with recovery typically limited to demonstrable loss. In practice, these obligations are often secured through escrow or holdback arrangements, and the contractual limitation periods are frequently negotiated between the parties. W&I insurance overlays this framework by substituting the seller's covenant with that of an insurer, offering buyers recourse against a credit-rated counterparty while freeing sellers from extended post-closing exposure.

Typical buy-side policies in regional transactions provide limits of 20 to 30 percent of enterprise value,⁴ with survival periods of approximately three (3) years for general warranties and up to seven (7) years for tax or fundamental warranties.⁵ These terms are broadly consistent with international W&I market standards, signalling that regional deal practice increasingly mirrors global underwriting norms. In Egypt, this benchmark alignment gives both insurers and investors a familiar reference point for assessing exposure and setting premiums, as the risk parameters fall within globally recognised ranges, parties can negotiate with greater confidence and efficiency. This consistency allows W&I insurance to function more effectively as a complementary risk allocation tool, allowing it to integrate naturally into local deal structures.

W&I Insurance Within Egypt's Transactional Toolkit

In Egypt, risk management in M&A has traditionally relied on well-tested contractual mechanisms. Parties commonly use escrow arrangements to hold part of the purchase price during the warranty period or rely on retentions and holdbacks to manage post-closing claims. Special indemnities, particularly for tax, compliance, or regulatory exposures, are common, and detailed breach and termination provisions remain a staple of Egyptian share purchase agreements. However, as deal sizes grow and cross-border participation increases, W&I insurance is increasingly being used as an alternative to these mechanisms, allowing parties to achieve cleaner exits and more efficient allocations of risk.

W&I insurance is not intended to replace traditional risk-allocation mechanisms, but it can offer distinct advantages. It is particularly effective in transactions having an Egyptian component and a cross-border or offshore element, where international investors are involved, or where documentation is prepared in accordance with international standards. In such cases, insurers are more familiar with the structure, scope of warranties, and due diligence process, allowing them to assess and price risk with greater confidence and to offer coverage on terms that are more consistent with global market practice. W&I insurance can also streamline negotiations and bridge liability gaps between buyers and sellers. For private equity sellers, it provides a route to a clean exit and faster capital distributions by reducing the need for extended escrow or holdback arrangements. Several transactions with an Egyptian component have already been insured through offshore policies governed by foreign law and placed via regional or international insurance hubs, demonstrating that the model is already operating effectively where the transaction profile supports it.

Practical Advantages of Local Underwriters

Although W&I insurance for Egypt-related transactions is currently placed through international insurers, the emergence of local underwriting capability would strengthen the product's commercial efficiency and relevance. A local underwriting presence would enable insurers to assess risk and review disclosures with a practical understanding of how Egyptian transactions are structured and documented. Familiarity with local law, regulatory expectations, and market practice would help ensure that policies are aligned with the way deals are actually negotiated and executed, allowing underwriting to progress more efficiently and with fewer procedural bottlenecks. In parallel, local underwriters would be able to engage directly with Egyptian counsel and advisers, facilitating clearer communication on identified risks and strengthening confidence in the due diligence process; which in turn supports more accurate underwriting, fewer coverage gaps, and smoother claim outcomes.

From a pricing perspective, domestic underwriting capacity could introduce competitive pressure on premiums and underwriting fees, which remain slightly above mature-market levels due to offshore placement and reinsurer participation costs. The presence of locally authorised underwriters or fronted arrangements supported by international capacity would also improve accessibility for mid-market transactions that currently find offshore placement uneconomic.

Beyond pricing, proximity enhances claims efficiency, allowing loss assessment, expert engagement, and settlement to proceed under local procedures and regulatory oversight. Over time, these efficiencies could make W&I insurance more accessible across a broader range of Egyptian and Egypt-related transactions, complementing the established role of offshore markets while deepening the product's integration into local M&A practice.

A Market Moving Forward

In Egypt, the Financial Regulatory Authority (FRA) oversees all insurance and non-banking financial activities, pursuant to Law No. 10 of 2009 and the Unified Insurance Law No. 155 of 2024. Although there is currently no dedicated legal regime governing W&I insurance, the product is conceptually similar to other liability insurance schemes already governed by the FRA. As such, once formally introduced, W&I insurance would likely fall under the FRA's regulatory umbrella with respect to licensing, policy terms and disclosure requirements.

As the FRA continues to modernise the insurance sector and explore new product frameworks, there is a growing scope for specialised solutions, such as W&I insurance, to be accommodated in the regulatory landscape.

Egypt's insurance sector is entering a decisive phase of reform that could materially influence the feasibility of W&I coverage in local and cross-border M&A. In January 2025, the FRA issued Decree No. 196 of 2024, implementing the Unified Insurance Law No. 155 of 2024 and mandating a phased increase in the minimum capital of insurers, rising to EGP 600 million for property and liability carriers and EGP 1 billion for reinsurers within two (2) years. The FRA explained that the higher capital base is intended to enhance solvency, expand underwriting capacity for larger risks, and accelerate digital transformation across the sector. These measures, coupled with the FRA's broader focus on financial inclusion and technological innovation, reflect a clear commitment to advancing the sophistication, depth, and resilience of Egypt's domestic insurance market.

For the transactional risk community, these developments matter. A better-capitalised and digitally enabled insurance sector creates the preconditions for local carriers, or locally fronted structures, to eventually participate in complex products such as W&I insurance. In the near term, most Egyptian-related policies will continue to be placed through offshore markets, but regulatory consolidation, solvency reform, and a maturing underwriting culture suggest that the boundary between "foreign-placed" and "locally supported" cover could narrow over the medium term.

Footnotes

1. Financier Worldwide, "Q&A: Warranty and indemnity insurance in the Middle East," July 2024 (Lockton panel)

2. Jones Day, "Current Trends in Warranty and Indemnity Insurance in M&A Transactions Governed by English Law," March 2016.

3. Aon Global Transaction Solutions Report 2024; PwC TransAct Middle East 2025 Mid-Year Update.

4. Aon, "De-risking M&A Transactions with Warranty & Indemnity Insurance," 2024.

5. Moalem Weitemeyer, "Navigating Transactional Risks with W&I Insurance," June 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.