Industries Article
Insurance strategies for private equity: identifying risk gaps
A useful review connects the policies in place with the business you are buying, operating, or planning to grow.
An acquisition can bring together companies with different operations, locations, contracts, and insurance arrangements. Understanding those differences helps ownership see which questions need to be resolved before closing and which need attention during integration.
Start with the business itself, then assess how its insurance responds.
Compare coverage with actual operations
Ask management and the insurance team to review the work the company performs, the locations it uses, and its reliance on contractors or other third parties. Include planned changes, not just the business as it operates today.
Read the policies and endorsements alongside those facts. Focus on exclusions, sublimits, deductibles, and conditions that could materially affect the company. A coverage summary is a useful starting point, but it does not replace the policy wording.
Make the financial implications clear
Ask the review team to explain the significance of each finding and the options for addressing it. That may involve changes to insurance, contracts, operating practices, or the amount of risk the business retains.
Separate confirmed findings from questions that need more information. Where a proposed change has a cost, make clear whether it is a quoted premium, an estimate, or an amount still to be determined.
Agree on the scope of an independent review
Before beginning, establish the documents needed, the confidentiality arrangements, the reporting timetable, and who will discuss findings with management.
Confirm whether the work is a review of the existing program or includes approaching insurers for alternatives. Agree on any insurer engagement in advance, along with who will coordinate it.
The resulting report should identify priorities and owners so the findings can become actions.
Carry the review into ownership
An insurance review should inform integration and future business decisions. Revisit the program when the company adds locations, enters new markets, introduces services, or completes another acquisition.
Where acquired companies retain separate policies and renewal dates, assess whether coordination would help. The right structure depends on the operations and available coverage. See how Virtus coordinated a coverage line across four roofing companies.
Evaluating an acquisition or reviewing a portfolio company? Talk with our Private Capital team about the questions to address and the scope of a review.
