An Indian chemical company acquired a plant in Germany from a multinational corporation, with the deal's closure dependent on securing the necessary insurance.

However, they made the mistake of assuming they could secure the policy after final negotiations were completed. This proved to be a costly error as in Germany there is a three-month cancellation period before which the insurer needs to be informed of policy cancellation.

When they approached the insurer to cancel the policy and reissue it to the new owner, they found out that the plant was classified as a category 5 environmental risk - "extremely hazardous". Category 5 properties are subject to strict regulations and mandatory environmental risk insurance coverage.

Unfortunately, most large insurers, including the existing insurer, refused to insure the property due to the high-risk classification. This jeopardized the entire deal as the absence of mandatory insurance was a legal requirement for the new owner.

With only a month before the deal's closure, the Indian broker was unable to secure the necessary environmental risk insurance coverage despite having international connections. They turned to our environmental risk management and insurance specialists for help. Our advisors leveraged their expertise and industry connections to assist the broker in securing the necessary policy.

The Indian chemical company had to pay higher premiums due to the category 5 classification and two insurers sharing the risk. This caused a delay of a month in the deal's closure, but the company was ultimately successful in securing the necessary insurance and finalizing the acquisition.

This case highlights the importance of understanding local regulations and requirements, especially when acquiring businesses overseas, and the need to work with specialists who have the necessary expertise and industry connections to navigate complex environmental risk management and insurance issues.

We understand that obtaining environmental risk insurance can be challenging. Our advisors have successfully assisted brokers to secure the policies thus avoiding serious consequences like losing a merger deal due to unavailability of the insurance.