The risk management due diligence should uncover undisclosed and unexpected liabilities and exposures that the acquiring company could assume as a part of the merger and acquisition. The risk management review should assess the acquired company's risk management program and look for opportunities to improve the coverage and save costs after the merger and acquisition is finalized.
The risk management due diligence process is important for a number of reasons: (1) the growing number and complexity of insurance products; (2) the unpredictability of court decisions regarding whether the successor company is entitled to the insurance assets of the acquired company when claims arise; (3) the increased complexity of insurance claims and lawsuits; (4) the high cost of litigation; (5) the increasing number of long-tail claims; and (6) insurance companies looking to avoid providing coverage for claims presented to them for acquired companies.
Attached on our website is my recent article “Merger and Acquisition Due Diligence Evaluation and Checklist” which should provide risk management guidance to companies who are involved in a merger or acquisition. Please feel free to contact me if you have any questions.