Risk Partners Life Sciences Roundtable 2025, thank you very much!
Risk Partners Life Sciences Roundtable 2025, thank you very much!
People who have received COVID-19 economic aid often assume that the matter is settled once the final settlement is issued. In many cases, this assumption is incorrect. While the administrative process is well underway, key legal issues have not yet been fully resolved.
When grant amounts are high, decisions are still pending, or a recovery scenario is foreseeable, the financial consequences can become apparent early on: in financing discussions, on the balance sheet, in annual profits, or in upcoming transactions.
In March 2026, the Hamburg Administrative Court (VG Hamburg) referred key state aid law questions regarding the interpretation of the Temporary Framework to the Court of Justice of the European Union (CJEU). Until the CJEU issues a ruling, the legal situation on this point remains unclear. This could have direct implications for the valuation of open risk positions.
For companies, investors, and consultants facing a identified clawback risk of approximately €2.0 million or more, contingent risk insurance can provide financial predictability and strengthen their position vis-à-vis buyers, lenders, or auditors.
Companies that received COVID-19 economic aid between 2020 and 2022 may still be subject to audits and recovery requests. Relevant programs include, in particular , Bridging Aid I through IV, November and December Aid, and Restart Aid; in addition, depending on the program and state, emergency aid and supplementary state programs may also apply.
Payments for the interim aid as well as the November and December aid were made based on preliminary data regarding revenue trends, revenue shortfalls, and the assessment criteria relevant for funding. The final amount of funding will be reviewed as part of the final settlement and determined by a final decision. If the determined amount is less than the sum paid out, the difference must generally be reimbursed. The regular deadline for submitting the final settlement for these programs was October 31, 2023; if an extension was requested, the deadline was September 30, 2024, at the latest [1].
According to the Federal Ministry for Economic Affairs and Energy, as of April 2025, approximately 61% of the final statements submitted had been processed; in about 29% of the processed cases, partial recovery claims were issued [2]. Administrative and court proceedings related to recovery claims are still pending; the status of proceedings and administrative practices vary by federal state and granting authority [3].
In addition to the ongoing administrative review of final statements, there is a separate issue under state aid law: Did individual companies actually face a pandemic-related liquidity shortage, or was the European Commission’s (EC) approval of the “2020 Federal Small Grant Scheme” sufficient for national approval practices? In this regard, the Hamburg Administrative Court referred two questions regarding the interpretation of the Temporary Framework to the ECJ in March 2026. Until the ECJ issues a ruling, the legal situation on this point remains open [4,5].
Administrative court case law is not uniform on this point. In several decisions in 2025, the Higher Administrative Court of North Rhine-Westphalia (OVG NRW) and the Administrative Court of Cologne (VG Köln) set forth strict requirements under state aid law: The “2020 Federal Regulation on Small Grants” permitted, on the basis of Art. 107(3)(b) TFEU, only grants intended to alleviate pandemic-related liquidity shortages and to ensure the viability of businesses [6,7,8,9]. In a ruling from April 2026, the Higher Administrative Court of North Rhine-Westphalia (OVG NRW) deemed the relevant NRW funding guideline for Bridging Aid III to be compatible with this, because it was based on explicitly named fixed-cost items necessary to maintain business operations and ensure capital adequacy [10]. The outcome remains open for other programs or federal states with differing funding structures.
For companies dealing with large funding volumes, pending regulatory decisions, ongoing appeals, or transaction-related risk exposures, this uncertainty is not merely an abstract legal issue. It can directly impact the value of a transaction, a financing decision, or a balance sheet item.
A final decision clarifies the amount of funding awarded. However, it does not always completely eliminate the risk of having to repay the funds. Under German administrative procedure law, administrative acts may be rescinded or revoked under strict conditions; this may result in an obligation to repay benefits that have already been granted (Sections 48, 49, 49a of the Administrative Procedure Act) [11].
In addition, there is the issue of European law: If the European Commission determines that state aid is unlawful and incompatible with the internal market, this can generally trigger an obligation on the part of the Member State to recover the aid, even if a final decision has already been issued at the national level [12].
This means that final decisions are not generally at risk. If the application is filed properly and a final decision has been issued, the risk is generally significantly reduced. An insurable residual risk exists primarily when the decision-making process is still pending, legal appeals are pending, or issues related to state aid law could subsequently affect the specific facts of the case.
Contingent risk insurance is tailored to a risk that has already been identified but remains uncertain. Unlike W&I (Warranty & Indemnity) insurance, which covers unknown risks arising from breaches of warranties and indemnities under a purchase agreement, this type of insurance addresses a clearly defined scenario whose occurrence and extent have not yet been determined.
The key factor in determining insurability is the distinction between a risk that is still uncertain and a loss that has already occurred. As long as the claim for repayment has not been definitively established and the legal basis has not been sufficiently defined, a contingent risk transfer generally remains a viable option. If, on the other hand, the obligation to repay is final and no longer subject to challenge on economic grounds, insurance is usually no longer an option.
In the context of COVID-19 economic relief measures, such a policy can provide coverage for financial losses resulting from a government demand for repayment. Depending on the terms negotiated, the coverage may include the repayment amount itself, any interest and incidental costs, as well as legal defense costs. The scope of coverage and terms are negotiated on a case-by-case basis and depend largely on the quality of the legal analysis.
The economic benefits extend beyond potential compensation for losses. For business owners, an insured risk position can simplify balance sheet valuation, discussions regarding provisions, and financing negotiations. For investors and advisors, it can open up additional options in transactions when escrow, purchase price retention, or indemnification are not economically viable.
Contingent risk insurance for the risk of having to repay COVID-19 economic aid is particularly suitable for:
Experience has shown that this issue is particularly relevant in industries with high subsidy volumes and complex state aid calculations, such as travel and tourism, the hotel industry, the restaurant industry, the events industry, the cultural sector, trade shows, leisure, fitness, brick-and-mortar retail, and other service sectors heavily impacted by business closures.
For business owners, the risk of having to repay COVID-19 economic aid is rarely just a legal issue. Even if the final settlement has already been submitted and a decision has been issued, it can tie up liquidity, trigger the need for provisions, complicate financing discussions, or burden succession and transaction processes. Especially in cases involving large amounts of aid, it is therefore important to assess early on whether an insurable, legally definable risk still exists.
The decisive factor is whether the outcome of the proceedings is still open and whether the facts of the case can be presented in a way that supports an insurance solution. As the proceedings progress, this window narrows significantly, and once a recovery decision becomes final—with no further legal remedies available—it generally closes. Those who wish to take action should not wait for the next procedural step. Whether one’s own case is suitable for the insurance market can usually be assessed quickly based on the available decisions and documents.
Risks of having to repay COVID-19 economic aid can lead to purchase price withholdings, escrow claims, or indemnification discussions during sale processes. This can delay exit processes, complicate negotiations, or reduce the sale proceeds.
Contingent risk insurance makes it possible to structure an identified risk from an insurance perspective and limit its economic impact prior to an exit. This strengthens the negotiating position vis-à-vis buyers and financing partners, rather than carrying the risk unresolved into the purchase price negotiations.
In transactions, the risk of having to repay COVID-19 economic aid often only becomes apparent during due diligence. Buyers are then faced with the question of how to hedge this risk; for sellers, escrow arrangements, purchase price retention, or indemnification can significantly burden the financial terms of the exit.
A contingent risk policy can provide coverage for a defined clawback mechanism outside the general warranty structure. It does not replace thorough legal due diligence, but it can create additional room for maneuver where a purely contractual allocation of risk is not economically viable or threatens to stall negotiations.
Tax advisors and certified public accountants are typically closely involved in final settlements, calculation methodologies, and the preparation of annual financial statements. They are therefore often the first point of contact for a factual and economic assessment of a potential risk of reimbursement claims. Since applications for COVID-19 economic aid were typically submitted through tax advisors, their involvement is also logical for the insurance audit.
An insured risk can be classified much more clearly in accounting, liquidity planning, and coordination with auditors than an open uncertainty regarding repayment claims. The tax and business analysis also serves as an essential basis for the underwriting review. Early involvement therefore facilitates the preparation of the facts in a manner suitable for insurance purposes.
For legal advisors, the added value of an insurance solution lies in structuring a legally tenable risk position in such a way that it becomes definable and assessable for the insurance market. It is not the abstract risk of recourse as such that is insurable, but rather a specifically defined, documented, and legally justified risk event.
In M&A mandates and in cases involving balance sheet-relevant risks, a contingent risk policy can offer an alternative to purely contractual risk allocation, particularly if escrow or purchase price retention would be economically unsatisfactory for the client.
Not every risk of recoupment can be insured. Particularly critical are situations in which:
Depending on the stage of the proceedings, a contested recovery notice may still be subject to review. Once a recovery notice becomes final and all legal remedies have been exhausted, insurance coverage is generally no longer an option.
The central issue under state aid law remains unresolved pending a decision by the European Court of Justice. Until then, recovery risks can still be classified as uncertain risks and structured for an insurance solution. This option may become significantly more limited as the situation develops, for example, if a recovery order becomes final or if case law definitively resolves the key issue in dispute.
Early assessment improves the chances of obtaining a well-founded evaluation of insurability, the potential scope of coverage, and the premium. As the process progresses, an unresolved risk can turn into a definite financial loss.
This article is intended for general informational purposes only and does not constitute specific legal, tax, or insurance advice. Whether and to what extent insurance coverage is available depends on the specific facts of the case, a legal review, the insurers’ underwriting requirements, and the final terms of the policy.
[1] Federal Ministry for Economic Affairs and Energy / Bridging Aid Portal, Final Settlement: Deadlines, Final Decision, Additional Payment/Repayment.
[2] Federal Ministry for Economic Affairs and Energy, “Final Settlement of COVID-19 Economic Aid is Moving Forward,” April 2025.
[3] German Bundestag, Scientific Services, WD 5 – 3000 – 099/25, Recovery of COVID-19 Aid, Finalized December 2, 2025.
[4] Hamburg Administrative Court, Decision of March 20, 2026 – 16 K 4919/22, Referral to the ECJ regarding the interpretation of the Temporary Framework.
[5] European Commission, Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak.
[6] Higher Administrative Court of North Rhine-Westphalia, Judgment of August 25, 2025 – 4 A 1555/23.
[7] Higher Administrative Court of North Rhine-Westphalia, Judgment of September 9, 2025 – 4 A 1793/23.
[8] Administrative Court of Cologne, Judgment of December 5, 2025 – 16 K 717/24, Bridging Aid IV.
[9] Cologne Administrative Court, Judgment of December 5, 2025 – 16 K 3014/24, Restart Assistance / Restart Assistance Plus.
[10] Higher Administrative Court of North Rhine-Westphalia, Judgment of April 16, 2026 – 4 A 2068/23, Bridging Assistance III NRW.
[11] Sections 48, 49, 49a of the Administrative Procedure Act (VwVfG).
[12] Article 16 of Council Regulation (EU) 2015/1589 of July 13, 2015, supplemented by Article 17 regarding the statute of limitations on recovery powers.
How does Risk Partners provide support?
Risk Partners first assesses whether your case is generally suitable for contingent risk insurance. Key factors include the status of the proceedings, the status of official decisions, the financial magnitude of the risk, and whether the risk can be clearly defined in legal terms and presented to the insurance market in a robust manner.
Insurers require a detailed legal analysis of the facts (legal memo) before they will issue a quote. If you have not yet engaged appropriate legal counsel, we can put you in touch with specialized law firms.
The legal assessment is the responsibility of the legal advisors involved. Tax and financial documents are provided by the company and its tax advisors or auditors. Risk Partners compiles the information relevant to insurance and coordinates the market inquiry with suitable specialty insurers.
We then negotiate the scope of coverage, the premium, and key terms and conditions, and oversee the placement process through to the issuance of the policy.
If you would like an initial assessment for your company, a portfolio company, or a transaction, please contact us.
