W&I Insurance in the Spanish Market

Warranty & Indemnity (W&I) insurance has transitioned from a niche product to a standard feature in Spanish M&A transactions. This evolution reflects growing confidence in the market and insurers’ ability to deliver increasingly sophisticated solutions at competitive premiums. Today, W&I is a key instrument in private equity and mid-market deals, and demand continues to rise.

Claims are no longer rare: between 15% and 20% of policies lead to a claim, most within two years of signing. The usual triggers include tax exposures, breaches of commercial contracts, compliance failures, financial misstatements and labor disputes. Spanish law makes W&I insurance even more relevant because, while SPAs often include liability exclusions, fraud carve-outs cannot be waived. Any attempt to limit liability for fraud is void. For sellers seeking a clean exit and buyers demanding certainty, W&I coverage is indispensable.

Buy-Side Dominance and Fraud Exclusions

The Spanish market is largely driven by buy-side policies, which allow buyers to claim directly against the insurer for breaches of warranties under the SPA without first pursuing the seller. Coverage typically extends to seller fraud, subject to the insurer’s subrogation rights. As the insured party, the buyer must cooperate with the insurer and preserve these rights.

Sell-side policies, by contrast, always exclude fraud. This reflects a principle confirmed by the Spanish Supreme Court: intentional acts cannot be insured because insurance must remain aleatory, dependent on uncertainty and not on the insured’s will (Judgment of the Spanish Supreme Court No. 1544/2023, 20 April 2023).

This structure simplifies recovery for buyers and lets sellers cap liability, often at €1.00, a feature highly valued in competitive auctions. For all parties, it brings certainty and efficiency. For insurers, it means careful underwriting focused on due diligence quality, warranty scope and transaction structure.

Practical Insights in Spain

Early engagement is critical, especially in auctions where sellers may offer “hard” or “soft staples” to accelerate placement. Under Spanish civil law, damages are generally calculated based on actual patrimonial loss rather than share value reduction, although SPA terms prevail, which is an important consideration for drafting and claims handling.

Market trends show growing demand for enhancements such as knowledge and materiality scrapes, extended warranty periods, and coverage for indirect losses (lucro cesante). Clear drafting is essential, as Spanish courts tend to interpret ambiguities in favor of coverage. Finally, proactive claims management (prompt notifications and open communication) helps maintain trust and efficiency in this expanding segment.