In our recent webinar on 25 March, we examined the fast evolving landscape of tax risk insurance and its growing role in managing transactional and non transactional tax exposures across global markets.
We are pleased to share the key highlights from the discussion. Bringing together specialists from the UK, Europe, and the US, the session provided an in‑depth look at how the product has matured, the types of risks now commonly insured, and the practical steps taxpayers can take to optimise value when putting a policy in place.
Key highlights from our webinar
Understanding tax risk insurance
- Tax risk insurance provides coverage for specific, identified tax risks, typically those uncovered during due diligence.
- Unlike W&I / R&W insurance (which covers unknown risks), tax risk insurance is designed for known, technically defensible risks.
- The product has evolved significantly: once niche and expensive, it is now a mainstream tool with wide global adoption.
Why clients use tax risk insurance
In M&A
- Enables a “clean exit” for sellers by removing the need for indemnities or escrow.
- Provides buyers with the security of insurer covenant strength, often stronger than that of individual sellers.
- Helps unblock transactions where tax uncertainty is creating negotiation deadlock.
Outside M&A
- Used to release provisions, address historic tax exposures, and support refinancings or corporate restructurings.
- Provides certainty faster than tax authority clearances, which can take months and may not be definitive.
What Can Be Insured
- Increasingly broad categories, including:
- M&A‑related tax exposures
- VAT classification issues
- Tax under audit or in litigation
- Exit tax and cross-border reorganisations
- Transfer pricing issues (within limits)
- Real estate transfer tax exposures
- Renewable energy credits (US)
Not covered: high‑risk issues, pure detection risk, marketed avoidance schemes.
Key steps in the process
- Submission of the risk to the market via a broker
- Insurers provide non‑binding indications (NBIs)
- Selection of preferred insurer
- Detailed underwriting and Q&A
- Policy drafting and negotiation
- Binding of the policy and premium payment
Processes run fastest when taxpayers provide robust technical analysis and clear documentation upfront.
Optimising value for clients
- Invest early in high‑quality technical advice, ideally from a reputable advisor with relevant jurisdictional experience.
- Choose brokers and insurers based on expertise and track record—not purely on premium cost.
- Carefully quantify tax, interest, penalties, defence costs, and potential gross‑up to ensure adequate policy limits.
- Actively participate in underwriting to accelerate timelines and strengthen coverage outcomes.
- Treat the policy as a living document, ensuring ongoing compliance with notification and conduct obligations.
Global trends and jurisdictional insights
Germany
- Strong focus on real estate transfer tax, driven by frequent legislative changes and complex ownership structures.
- Growing interest in insuring exit tax exposures linked to corporate migrations.
- Transfer pricing insurance emerging for recharacterisation of shareholder loans and business function relocations.
UK and Europe
- Increasing use of insurance for a wide range of issues.
- Early discussions emerging on insuring Pillar Two‑related risks, though market practice is still developing.
US
- Continued high demand for renewable energy credit coverage, now standard in many transactions.
- Growth in insurance for state and local tax exposures, including residency changes and sales & use tax issues.
- Delays and limitations in tax authority rulings are driving greater reliance on insurance for transactional certainty.
Overall takeaway
The tax risk insurance market is experiencing significant global growth, with increasing insurer capacity, broader risk appetite, and rising claims activity indicating a mature, trusted product. As tax rules become more complex and enforcement levels continue to rise, tax risk insurance offers businesses a powerful way to unlock transactions, achieve certainty, reduce balance‑sheet volatility, and navigate ambiguity with confidence.
Eversheds Sutherland dokłada wszelkich starań, aby materiały, informacje i dokumenty, w tym między innymi artykuły, biuletyny, raporty i blogi („Materiały”) publikowane na stronie Eversheds Sutherland były dokładne i kompletne. Należy jednak pamiętać, że Materiały są udostępniane wyłącznie w celach informacyjnych, a nie w celu udzielenia porady prawnej i niekoniecznie odzwierciedlają obowiązujące aktualnie przepisy prawa. Materiały nie powinny być interpretowane jako porada prawna w jakiejkolwiek sprawie.
Materiały mogą nie odzwierciedlać najnowszych zmian prawnych. Treść i interpretacja Materiałów oraz przepisy prawa wspomniane w Materiałach podlegają zmianom.
Eversheds Sutherland nie składa żadnych oświadczeń ani gwarancji, wyraźnych ani dorozumianych, co do dokładności lub kompletności Materiałów, a zatem nie należy na nich polegać. Eversheds Sutherland zrzeka się wszelkiej odpowiedzialności za działania podjęte lub niepodjęte w oparciu o część lub całość Materiałów w najszerszym zakresie dozwolonym przez prawo. Materiały nie muszą być wyczerpujące ani zawierać porad, na których można polegać. W każdej konkretnej sprawie prawnej należy zawsze skonsultować się indywidualnie z odpowiednio wykwalifikowanym prawnikiem.
Wszelkie poglądy wyrażone za pośrednictwem Materiałów są poglądami indywidualnego autora i mogą nie odzwierciedlać poglądów Eversheds Sutherland lub jakiegokolwiek innego indywidualnego prawnika.