Our consultants are experienced in undertaking both buy-side and sell-side due diligence of insurance, health, pension and financial institutions. Due diligence in these sectors is vastly different than for most other sectors due to potential for future losses if risks have not been properly assessed or models are inconsistent.
Actuarial due diligence helps companies assess historic, current and future risk exposures and costs/losses. It is designed to identify any risk and model issues prior to a transaction, ensuring financial implications are understood and included in the negotiation or modelled where appropriate.
A typical actuarial due diligence process involves:
- Evaluating the company’s current and future risk profile
- Reviewing current and proposed risk transfer and risk retention arrangements
- Reviewing and analysing historic claims and liabilities
- Identifying future risk transfer (insurance) options and their potential costs
- Identifying statutory compliance requirements
- Identifying and quantifying contingent liabilities
- Identifying relevant sale and purchase issues
- Commenting on quality and sufficiency of the disclosed information
- Ultimately deliver the due diligence report including executive summary
Who should be undertaking actuarial due diligence?
- Buy-side: Actuarial due diligence is usually an acquisition cost for a buyer as part of the wider transaction review process. It provides the buyer’s investment committee with relevant operational risk and liability information on the target company.
- Sell-side: Actuarial due diligence can be used by a seller to help prepare for a sale, removing any obstacles or potential price-chip issues prior to entering the sale process.
What are the benefits of M&A Insurance due diligence?
Insurance due diligence enables parties to:
- Assess the appropriateness of the target’s current and the future (proposed) plan arrangements
- Identify the financial impact of the current and future anticipated total plan costs
- Establish any areas of potential improvement in the target’s operations which may be considered prudent
- Appropriately structure the insurance clauses within the Sale & Purchase Agreement.