India's mergers and acquisitions (M&A) landscape has transformed over the past decade, and the warranty and indemnity (W&I) insurance market has evolved alongside it. Once a niche risk-transfer solution used primarily in sponsor-led cross-border acquisitions, W&I insurance has become integral to deal structuring, reshaping how transactional risk is allocated in Indian M&A. The Indian M&A market recorded 963 announced transactions aggregating approximately $60.2 billion in 2025, representing a 36% increase in value and a 41% increase in deal volume over the previous year, according to a January 2026 report by The Economic Times.
Unlike mature W&I jurisdictions such as the US, the UK, Europe and Australia, India's market has evolved against the backdrop of founder-led businesses, a complex regulatory and tax environment and diverse sectoral compliance requirements. These characteristics have shaped a distinctly Indian underwriting model, with insurers emphasising tax, regulatory compliance, licensing, anti-corruption controls and operational diligence. India has emerged as one of the most active claims jurisdictions in the Asia-Pacific region, with claims experience contributing to broader coverage, greater pricing certainty and increased confidence amongst insurers and deal participants.
From niche product to strategic deal tool
What was once a specialist insurance product being availed primarily by financial sponsors and institutional investors is now becoming a mainstream transaction tool, enabling parties to bridge divergent expectations on post-closing liability while facilitating cleaner exits, preserving commercial relationships and delivering greater deal certainty. By replacing negotiations around indemnity caps, survival periods and escrow arrangements with an insurance-backed recourse mechanism, W&I insurance has streamlined transaction execution and become a key feature of sophisticated M&A structuring.
“A discernible shift has been the interest of promoter-led businesses in limiting prolonged indemnity obligations on themselves and their family, which has in turn led to them choosing W&I over contractual indemnity obligations,” said Shubhangi Pathak, director, transactional liability, Lockton Insurance Brokers.
This shift is evident across the Asia-Pacific region, where over 95% of W&I policies are buy-side policies and the "sell-buy flip" has become commonplace, particularly in competitive auctions, according to Lockton, Transaction Liability Market Update 2025. These trends are now embedded in India, where W&I insurance is relied upon by private equity investors, strategic acquirers and Indian corporates alike.
Regulatory tailwinds
The evolution of India's W&I market has been supported by progressive regulatory reforms. A key development is the increase in the foreign direct investment (FDI) cap in the insurance sector from 74% to 100%, announced in the Union Budget 2025, according to the Ministry of Finance, Government of India, February 1, 2025. This liberalised regime is expected to attract greater foreign participation, expand underwriting capacity, improve policy limits and foster competitive pricing, accelerating adoption of transactional risk insurance across Indian M&A.
The continued evolution of India's reinsurance framework has also strengthened the market, according to the Insurance Regulatory and Development Authority of India (IRDAI) and Master Circular on Foreign Reinsurers and Lloyd’s India, 2024. IRDAI’s enhanced collateral requirements for cross-border reinsurers (CBRs) are expected to improve reinsurance security and support higher policy limits for complex transactions.
Emerging coverage areas
Perhaps the clearest indicator of Indian W&I market maturity is not merely the increase in policy placements, but the steady expansion of insurable risks. Areas once routinely excluded or regarded as "hard no" underwriting positions are now increasingly subject to nuanced underwriting, reflecting greater insurer familiarity with Indian regulatory frameworks, improved due diligence quality and accumulated local claims experience.
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Anti-bribery and anti-corruption: ABAC remains one of the most sensitive underwriting areas in Indian W&I transactions. Insurers expect comprehensive compliance diligence, including review of policies and procedures in force, review of implementation of such policies and procedures along with any historical investigations and evidence of a robust compliance programme. Underwriters are also keen to understand the manner in which non-compliances, if any, are addressed by the relevant target entity’s management. While policies typically begin with an ABAC exclusion, underwriters are increasingly willing to narrow or remove it where diligence demonstrates a strong compliance and no material red flags. Where coverage is provided, it is generally limited to specific warranty breaches relating to compliance policies, training, books and records, and the absence of unlawful payments, while known issues and ongoing investigations remain excluded.
Expansion of the scope of fundamental warranties: Historically warranties relating to authority, title and capacity were the only ones included within the ambit of fundamental warranties. However, Shubhangi Pathak believes that lately underwriters have been open to including warranties which are critical to the business of the target entity, such as land title warranties and intellectual property ownership warranties within fundamental warranties where the warranty period is typically seven years and the retention/deductible is not applicable. Such additional warranties of course need to be substantiated with adequate diligence but this shift in approach is indeed a welcome change.
Stamp duty: Historic stamp duty exposures continue to be excluded from W&I coverage owing to India's fragmented, state-specific stamping regime, while stamp duty on transaction documents is treated as a deal cost. However, underwriters are increasingly willing to consider limited cover where supported by legal analysis on adequacy of stamping or registration and a clean compliance history. In some transactions, insurers have introduced a materiality qualifier by limiting the warranty to adequately stamped "material contracts" rather than all contracts.
Anti-trust compliance: Increased enforcement by the Competition Commission of India (CCI), particularly regarding gun-jumping, merger notification and cartel conduct, has made competition law a key underwriting focus. Insurers are scrutinising warranties relating to compliance with the Competition Act, 2002, including merger filings, standstill obligations and absence of ongoing investigations.
Tax risks: Tax insurance remains one of the fastest evolving areas within India's transactional risk insurance market. While historically focused on treaty entitlement and withholding tax risks, insurers are increasingly evaluating more complex exposures, including Principal Purpose Test analyses, Multilateral Instrument considerations, transfer pricing and capital gains tax risks. Recent judicial developments, including the Tiger Global ruling, have sharpened underwriting focus on treaty protection, substance requirements and offshore investment structures. Given the complexity of these exposures, such risks are typically addressed through standalone tax insurance policies rather than standard W&I coverage.
Data protection and cyber risk: With the enactment of the Digital Personal Data Protection Act, 2023 and notification of the Digital Personal Data Protection Rules, 2025, data protection is increasingly becoming a forward-looking warranty area in Indian share purchase agreements. W&I policy terms now include reduced exclusions for risks typically covered by operational insurance, including cyber risk.
VDR scrape and disclosure quality: Underwriters are sensitive to disclosure quality and virtual data room (VDR) management, as data-room scrapes and due diligence report negotiations have become more common in Indian W&I placements. Insurers expect an organized, time-stamped VDR, detailed disclosures and due diligence reports that clearly state what was reviewed and scope limitations. Further, insurers are also now offering both VDR and Due Diligence Report scrapes together, which historically was rarely an option. This further limits the exclusions for a W&I Policy and provides more holistic coverage.
The road ahead
The Indian W&I market is entering its next phase, characterised by sophisticated underwriting, product innovation and broader adoption. While insurers demonstrate appetite for sectors with straightforward regulatory frameworks, underwriting is becoming granular and diligence-driven. Even heavily regulated sectors are witnessing greater underwriting engagement where supported by robust diligence.
Underwriters now being more familiar with the Indian M&A space are adopting a more balanced and commercially attuned approach where they are increasingly more open to evaluating the risk parameters and are attempting to find a way to offer better coverage positions through different mechanisms. The underwriting process has over a period of time evolved into a more collaborative exercise.
Looking ahead, sustained M&A activity, increasing private equity exits, cross-border investment and a liberalised insurance regime are expected to accelerate demand for transactional risk insurance. The market is already expanding beyond traditional sponsor-led buyouts into strategic acquisitions, founder-led exits, secondary transactions and mid-market deals, reflecting growing acceptance among Indian corporates and strategic investors.
Harshita Srivastava is partner and Palomita Sharma is associate at Shardul Amarchand Mangaldas & Co. Industry insights provided by Shubhangi Pathak, director, Transactional Liability, Lockton Insurance Brokers.
