Important Things to Consider When Merging Your Insurance Company

By Team INEX |

Mergers are essential for a thriving insurance company to extend its operations and grow an established book of business. The merger process is complex and deserves careful attention to ensure that any decisions being made ultimately benefit your agency. Below are some critical areas to think about.

Thoroughly Assess the Merging Insurance Company

Before merging your insurance company, assess the liability exposures carefully. This assessment reduces the risk that your agency acquires uninsured liabilities or faces significant risks. Evaluate agency policies and claims history to ensure sufficient coverage for specific vulnerabilities. In addition, check existing contracts for any transfer provisions or indemnities to identify areas where you might need additional protections.

Ensure Transferability of Asset Insurance Coverage

When your agency merges with another business, acquiring their assets means needing adequate insurance protection for those assets. Ensure that their asset coverage extends to you in case of any damage or loss suffered before the merger closes. Otherwise, your company will face financial responsibility for damage or loss that occurs before finalizing that transfer.

Consider the Importance of Extended D&O Coverage

In an insurance merger, agencies need to address the potential risks associated with outstanding claims after the expiration of a policy. As you merge with another agency, you should assess the potential for extended directors and officers (D&O) coverage to ensure adequate protection against any potential claims arising after the policies expire. Because there is a five-year window for claims after the policy lapses, this extended protection ensures minimal financial liability for your agency after the merger.

Validate Change-in-Control Provisions

Many policies, such as D&O coverage and fiduciary liability, limit the extension of coverage after a merger. Sometimes, the union triggers a change-in-control provision that restricts coverage in those policies to only losses, claims, and exposures occurring before the merger. It exposes you to risk factors for losses or claims afterward, so you need adequate coverage. Review the company’s policies for any change-in-control provisions so you can acquire coverage if necessary.

Invest in Coverage for Breach, Representation, and Warranty Risks

Every business transaction, especially mergers and acquisitions, comes with inherent risks for breach of contract or potential warranty risks. Both agencies should have adequate coverage for those exposures, especially in the event of material misrepresentation on the part of the merging company or a breach of contract on the acquiring agency’s position. Ultimately, both agencies need sufficient protection.

Expand Your Insurance Company With Confidence

The more you understand what to consider when merging your insurance company with another agency, the easier it is to protect your investment and ensure a beneficial, rewarding transaction. Consider the risk factors associated with each company’s role in the merger; evaluate the other agency’s coverage, policy limitations, and claims history; and then mitigate any risks before you move forward. With the right due diligence and coverage assessments, your insurance company will be financially secure and well-protected through the merger.


INEX is a multi-disciplinary firm providing management consulting to the owners of insurance agencies throughout the United States, and real estate investment services. Our senior principals have participated in over 300 perpetuation, merger and acquisition (M&A) transactions over the past three decades. Staff professional designations include Chartered Property & Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC) and Certified Commercial Investment Member (CCIM), as well as a variety of insurance and advisory licenses throughout the United States. To learn more, call us at 603-665-6000 or visit our website.