Tax insurance in cross-border transactions and structures

A report on a session at the IBA’s 26th Annual US and Europe Tax Practice Trends Conference held in Rome on 15 April 2026

Session Co-Chairs

Mariana Díaz-Moro, Gómez-Acebo & Pombo, Madrid
Devan Patrick, K&L Gates, Charlotte and Dallas

Speakers

Dean Andrews, Executive Director, Head of Tax and Contingent Liability Insurance, BMS Group, London
Rachel Hine, Tax Insurance Director, Certa Insurance Partners, London
Riccardo Petrelli, Legance, Milan
Mario Salandra, Managing Director, M&A and Transaction Solutions, Aon, New York
Olivia Sibieude, Head of France Tax, Howden Tax & Contingent Risks, Paris

Reporter

Jesper Møller
BAHR, Copenhagen
jmo@bahr.com

Introduction

The panel provided a comprehensive overview of tax insurance as a risk management tool in cross-border transactions and structures. The session covered the key product types available in the market, the roles of the principal players – brokers, insurers and advisers – and the underwriting process.

The panellists also discussed practical case studies, including the evolution of tax insurance out of representations and warranties insurance (W&I), cross-border considerations, M&A transactions, renewable energy tax credits and the availability of tax insurance for private clients.

The session concluded with a wide-ranging Q&A addressing pricing, detection risk, the role of brokers, claims processes and practical tips for advisers.

Panel discussion

After opening remarks and introductions by session Co-Chairs Mariana Díaz-Moro and Devan Patrick, the panel turned to the different types of tax insurance products available in the market.

Riccardo Petrelli explained the distinction between representations and W&I policies and standalone tax insurance policies. In an M&A context, W&I policies are linked to the warranties and indemnities in the share purchase agreement and typically cover only unknown risks, with standard exclusions for transfer pricing, tax assets and certain other matters. Standalone tax insurance policies, by contrast, are tailored to specific identified risks and need not be connected to a transaction.

Rachel Hine elaborated on tax position insurance, noting that such policies address known tax uncertainties – including positions taken in reliance on rulings or other factors that may not provide complete certainty – and are designed to give the insured comfort on a specific risk profile.

Riccardo Petrelli added that tax position insurance requires a thorough due diligence exercise and is tailored to the particular risk at hand, independently of any M&A transaction.

The discussion then moved to the process and the key players involved.

Dean Andrews and Mario Salandra described the role of brokers, who serve as the interface between the client (and its advisers) and the insurance market. Historically, brokers would become involved when a due diligence exercise uncovered specific tax risks. Increasingly, however, brokers are engaged at an earlier stage, including on a pre-deal basis, often through corporate finance advisers. The insurer sits on the other side of the market, assessing the risk and agreeing the terms of coverage.

Rachel Hine and Olivia Sibieude outlined the underwriting process. The client or its adviser approaches a broker with a specific tax issue to be placed in the market. The broker assesses the risk and, if appropriate, takes it to insurers. Further risk assessment may involve local advisers, depending on the nature of the risk.

Once an insurer is selected, negotiations commence, covering the scope of the tax liability, the terms of the policy (including conduct provisions governing how the insured must interact with tax authorities) and any applicable exclusions. Breach of the conduct provisions may result in the insurer declining or limiting coverage, making it essential for the insured to understand and comply with these requirements from the outset.

Devan Patrick emphasised that clients must understand the impact of the policy terms and conditions on the management of the insured risk.

Olivia Sibieude stressed that the broker’s role during the underwriting process goes beyond merely forwarding documents and information. Brokers play an active role in assessing risks and negotiating exclusions, drawing on their knowledge of market practice. She advised that the choice of broker is important, as a good broker can add value to the deal and risk process and provide valuable technical advice.

Rachel Hine noted that a standard tax insurance policy covers the tax loss itself, together with interest and penalties. Dean Andrews added that an insurance policy can provide for upfront payments to cover tax liabilities while tax litigation or a dispute with the authorities continues.

Mario Salandra illustrated the process with an example of a client selling a company where an adviser or auditor has identified a tax liability arising from a deal structure that does not work as intended. The broker needs to determine the amount that the insurance will pay, which is then taken to the insurance market. Premiums are generally in the range of three to five per cent of the insured limit, payable as a one-time premium. The policy duration typically aligns with the applicable statute of limitations for tax risks, with a market standard of approximately seven years.

Riccardo Petrelli raised the point that insurance proceeds may themselves be taxable, prompting the question of whether gross-up provisions should be included. The tax treatment of insurance proceeds – and consequently the need for gross-up provisions – varies significantly across jurisdictions, making this a key consideration in cross-border structures. He also noted that penalties are not always covered by the policy.

Olivia Sibieude highlighted the significant growth of the European tax insurance market in recent years, with pricing declining due to increased competition. She outlined common exclusions, including misrepresentation and change of law, and explained the concept of retention, which functions as a deductible below which the insurer does not pay out.

Dean Andrews noted that different market players tend to target specific risk profiles.

Mario Salandra observed that the ‘sweet spot’ for insured amounts is in the range of $80m–$100m.

Turning to case studies, Rachel Hine described the evolution of tax insurance from its origins in W&I carve-outs for tax issues in M&A transactions to the development of standalone tax insurance policies tailored to specific identified risks that can be addressed on a pre-deal basis.

Dean Andrews discussed cross-border considerations, including multijurisdictional risks such as withholding tax, permanent establishment, transfer pricing and anti-deferral regime exposure, and the coordination challenges between local counsel and global insurers. He noted that Spain has been the fastest growing European Union market for tax insurance submissions over the past five years, driven in part by increased scrutiny from the Spanish tax authorities of certain structures. By way of example, he described a situation where a fund wished to obtain insurance covering the risk that any future sale of a company would be affected by a loss of substance (ie, a lack of economic substance in the relevant entity), including seeking coverage before the relevant entity had been established.

In the M&A context, the panel discussed how W&I insurance, management incentive plans and other deal-related risks interact with tax position insurance. Dean Andrews noted that all parties – brokers, insurers, advisers and clients – must work together to address flagged risks. The broker’s role is to assess those risks and push for sufficient information to ensure they are covered by the policy. However, not all risks can be covered by a tax insurance policy.

Mario Salandra provided an overview of the US market for renewable energy tax credit insurance. In this market, a developer pays tax and receives a tax credit from the government. These credits are typically packaged with banks and corporate investors who take on the associated risk. Under the Inflation Reduction Act (IRA), credits can be transferred and purchased, and those transferred credits can themselves be insured.

On the topic of private clients, the panel noted that tax insurance may or may not be available depending on the circumstances, though specific situations – such as inheritance tax exposures – may be insurable.

Rachel Hine explained that some insurers can write policies for private clients, though this comes with challenges. An alternative structure involves insuring a corporate entity that can in turn indemnify the individual. Dean Andrews added that income tax issues that constitute a liability for a target – including withholding tax obligations – can also fall within the scope of tax insurance.

The session concluded with a wide-ranging Q&A. On the question of pricing, Rachel Hine explained that insurers will only cover risks where there is a strong technical assessment supporting the insured’s position. Detection risk is factored into pricing, taking into account the jurisdiction (including rule of law considerations and ratings), the technical strength of the position and whether the jurisdiction has an active audit regime.

Dean Andrews confirmed that active audits and jurisdictional audit practices play a significant role in pricing. Olivia Sibieude noted that insurers do not discuss pricing among themselves. Mario Salandra added that higher insured amounts tend to produce a lower premium as a percentage of the limit (a concept known as ‘towering’).

On adviser responsibility, Rachel Hine noted that the insurance market does not typically direct risk back to the advisers. The underwriter makes its own independent assessment of the risk. Regarding estate tax planning, Dean Andrews observed that there have been inquiries over the years relating to jurisdictional risk, though insuring individual residency remains more difficult. Mario Salandra distinguished between fact-based risks and legally-based risks in this context.

The panel also discussed the role of brokers, with Olivia Sibieude, Mario Salandra and Dean Andrews all confirming that while brokers work primarily for the client (who pays the premium), they must also navigate the realities of what the market is willing to offer. On the question of what to do when authorities approach on a covered risk, the panel emphasised a collaborative approach between the broker, insurer and advisers, with the taxpayer handling the process with the authorities while keeping the insurer informed.

As a final piece of advice, Olivia Sibieude recommended that advisers should always consider insurance before approaching the tax authorities for a ruling, as engaging with the authorities first can alter the risk profile and make insurance more difficult or expensive to obtain. Mario Salandra echoed this, advising that brokers should be involved as early as possible in the process.

The panel also noted that references to W&I insurance in the share purchase agreement or other deal documents should be handled with care, and that it may be advisable for the policy to be taken out by a different group entity rather than the entity directly carrying the risk.

Dean Andrews concluded by noting that the geographic uptake of tax insurance policies is expanding, with growing interest from South America, Africa and Asia.

Overall, the session underscored that tax insurance has matured into a versatile risk management tool, available not only in the M&A context but also for standalone tax positions, renewable energy credits and, in certain circumstances, private client exposures.

The key practical takeaway for advisers was to engage brokers early in the process and to consider insurance before approaching the tax authorities for a ruling.