Risk Partners Life Sciences Roundtable 2025, thank you very much!
Risk Partners Life Sciences Roundtable 2025, thank you very much!
Auf einen Blick:
Identified tax risks often cannot be covered through the standard mechanisms of W&I insurance. As soon as a tax position is known, described, or addressed during due diligence, W&I coverage typically does not apply or applies only to a limited extent. Tax Liability Insurance incorporates this known tax position into a separate coverage structure: It transfers a specifically defined individual tax risk to a specialized insurer.
Versichert wird in der Regel eine abgegrenzte Rechtsposition, beispielsweise die steuerneutrale Behandlung einer Umwandlung, die Nichtentstehung von Grunderwerbsteuer, die Fremdüblichkeit konzerninterner Finanzierung oder die steuerliche Einordnung eines Managementbeteiligungsprogramms. Der Sachverhalt muss nachvollziehbar dokumentiert und die vertretene Steuerposition rechtlich vertretbar sein.
Tax Risks in M&A Transactions
In transactions, tax liability insurance becomes particularly relevant when a known tax risk affects the allocation of risk between the buyer and the seller. Typical scenarios include:
Freistellungslücke im SPA: Der Käufer verlangt Schutz gegen ein identifiziertes Steuerrisiko, der Verkäufer will oder kann dafür aber keine belastbare Freistellung geben. Das betrifft insbesondere Verkäufe, bei denen nach Closing kein ausreichend haftungsfähiger Verkäufer mehr zur Verfügung steht.
Purchase Price, Escrow, and Retention: If a tax risk is accounted for only as a lump sum in the purchase price, this often results in overly conservative risk discounts. An insurance policy can replace the general discussion of risk with a defined limit and a clear coverage structure, thereby easing negotiations regarding the purchase price or escrow.
Bidding Process and Exit Readiness: A known tax issue can be reviewed and addressed to ensure compliance even before approaching potential buyers. While this does not prevent disclosure, it often takes the edge off the issue in terms of negotiation strategy. This is particularly relevant for sellers when an identified risk would otherwise be used early in the process as a justification for a reduction in the purchase price.
Private Equity, Fondsliquidation und Insolvenzverfahren: Bei Fondsauflösungen oder insolvenznahen Situationen kann ein offenes Steuerrisiko Kapital über Jahre binden. Eine Versicherung kann helfen, Kapitalbindung zu reduzieren, Ausschüttungen vorzubereiten und Exit- oder Fondsauflösungsstrukturen nicht über Jahre an ein offenes Steuerthema zu koppeln. Ob darüber hinaus persönliche Haftungsrisiken eines Insolvenzverwalters abgesichert werden, hängt von der konkreten Struktur, dem Versicherungsnehmer und dem Policenwortlaut ab.
Standalone: Tax Risks Outside of M&A
Tax Liability Insurance is not limited to M&A processes. It can also be used when companies, shareholders, managers, or family offices wish to limit the financial impact of a specific tax position or reduce it as an obstacle to a business decision. Relevant situations include, in particular:
Restrukturierungen und Umwandlungen: Verschmelzungen, Spaltungen, Formwechsel oder konzerninterne Übertragungen sollen häufig steuerneutral umgesetzt werden. Wenn die steuerliche Behandlung von Auslegung, Haltefristen, Zuordnung von Wirtschaftsgütern oder Missbrauchsfragen abhängt, kann eine Police das Risiko einer späteren Steuerbelastung abdecken.
Grunderwerbsteuer: Share Deals, Anteilsvereinigungen, konzerninterne Umstrukturierungen oder mehrstufige Beteiligungsketten können Grunderwerbsteuerfragen auslösen. Relevant sind insbesondere Risiken nach § 1 Abs. 2a, 2b, 3 und 3a GrEStG, Zurechnungsfragen bei mehrstöckigen Immobilienstrukturen (§ 1 Abs. 4a GrEStG bzw. frühere BFH-Rechtsprechung für Altfälle) sowie Folgeeffekte aus Verschmelzungen oder Beteiligungsverkürzungen.
Transfer Pricing: Above all, transfer pricing items that are clearly documented and legally and economically justifiable are insurable. In practice, situations that can be clearly defined—such as shareholder loans, financing structures, license payments, or certain routine functions—are more likely to be considered. Complex disputes over valuation and methodology remain more difficult to address.
Management Equity Interests: In MBO and LBO structures, the question regularly arises as to whether management’s proceeds should be classified as wages or as investment income. Tax liability insurance may be relevant for both the company and the managers involved if the equity structure is tax-efficient but not risk-free.
Tax Audits and Disputes: Even positions that have already been raised may be insurable in certain cases. The hurdles are higher in such cases because the insurer is no longer assessing merely an abstract legal uncertainty, but rather a position that is already the subject of a dispute. Litigation buyout structures are therefore more selective, more expensive, and often structured differently in terms of their payment mechanisms than traditional tax policies. Key factors include, in particular, the stage of the proceedings, the tax authority’s position to date, the defense strategy in the proceedings, and whether the insurer provides liquidity before a final assessment is issued or only pays out after the matter has been definitively resolved.
Research Allowance and Similar Tax Incentives: When it comes to tax incentives, insurance needs can often arise beyond the basic eligibility criteria—for example, regarding the amount of eligible expenses, documentation, the allocation of individual project costs, or subsequent tax assessments.
Tax Liability Insurance is a known-risk product. This means that the risk must already have been identified and be capable of being described as a separate tax item.
W&I-Versicherung: Die W&I-Versicherung schützt grundsätzlich gegen unbekannte Risiken aus Garantien und Freistellungen des Unternehmenskaufvertrags. Bekannte oder in der Due Diligence identifizierte Steuerpositionen fallen regelmäßig aus diesem Schutz heraus oder benötigen eine gesonderte Struktur. Praktisch betrifft das vor allem Verrechnungspreisrisiken und sekundäre Steuerhaftung, etwa die Haftung einer Organgesellschaft für Steuerschulden des Organträgers nach § 73 AO. Solche Positionen gehören in vielen W&I-Policen zu den typischen Ausschluss- oder Sonderprüfungsthemen. In solchen Fällen ist eine eigenständige Tax-Police häufig die geeignetere Struktur.
W&I affirmative cover: In einzelnen Fällen kann ein bekanntes Steuerrisiko als affirmative cover innerhalb einer W&I-Police aufgenommen werden. Das ist aber meist limitiert, stark einzelfallabhängig und nicht für jedes Risiko wirtschaftlich oder technisch sinnvoll. Bei größeren, komplexeren oder klar abgegrenzten Steuerpositionen ist eine separate Tax-Police häufig tragfähiger.
Specific Indemnity Insurance: Specific Indemnity Insurance can cover various known individual risks associated with a transaction. Tax Liability Insurance is a specialized form of this coverage: underwriting, risk assessment, and policy design are based on a tax analysis and are handled by tax underwriters or their tax advisors.
Contingent Risk Insurance: Die Contingent Risk Insurance deckt rechtliche Unsicherheiten außerhalb des Steuerrechts ab, etwa regulatorische, zivilrechtliche oder verfahrensbezogene Risiken. Die Tax Liability Insurance beschränkt sich auf steuerliche Risiken und folgt deshalb anderen Bewertungsmaßstäben: Steuerart, Festsetzungsverjährung, Aufgriffswahrscheinlichkeit, Behördenpraxis, steuerliche Nebenleistungen und Tax Gross-Up sind zentrale Parameter.
Insurers require well-documented facts. An item is insurable only if three conditions are met:
Not every tax uncertainty is suitable for an insurance policy. Particularly challenging cases include aggressive tax planning, intentional or grossly inaccurate disclosures, lack of documentation, risks arising solely from ongoing investigations, unresolved factual issues, tax authorities that have already taken a clearly negative stance, missed deadlines, and risks that depend significantly on future changes in the law.
Die verbindliche Auskunft kann bei noch nicht verwirklichten Sachverhalten hohe Rechtssicherheit schaffen. Sie bindet die Finanzverwaltung für den konkret beantragten, zutreffend dargestellten Sachverhalt und schafft damit eine andere Qualität von Rechtssicherheit als eine Versicherung, ist aber nicht in jeder Situation der praktisch bessere Weg.
Gegenüber der verbindlichen Auskunft unterscheidet sich die Tax Liability Insurance vor allem in drei Punkten:
These two approaches are not mutually exclusive. In many transaction and restructuring situations, however, it makes sense to first assess insurability before initiating a formal regulatory process. A negative regulatory assessment at this early stage can significantly complicate the subsequent placement.
A tax policy consists of a few parameters that are crucial from a financial perspective. In addition to the limit, term, and premium, the most important factors are how the insured tax position, the covered ancillary benefits, and the payment mechanism are defined.
Typical components of coverage include:
| Parameters | Typical Design |
| Policyholder | Buyer, seller, target company, group company, fund vehicle, manager, or individual—depending on the risk. |
| Covered Loss | Defined additional tax liability from the insured tax item. |
| Additional Benefits | Interest, surcharges, external defense costs, and, depending on the structure, tax gross-up; penalties only to the extent they are legally insurable. |
| Deductible | Often low or zero; may vary in the case of disputed risks or defense costs. |
| Bonus | A one-time premium, typically expressed as a percentage of the limit; the amount depends on the type of tax, jurisdiction, risk profile, documentation, and market competition. |
| Insurance Tax | In Germany, a flat rate of 19% is typically applied to the premium; in the case of cross-border structures, the risk exposure must be assessed separately. The policyholder’s place of residence or the insured establishment is often the determining factor, not solely the jurisdiction of the underlying tax risk. |
| Underwriting Costs | Costs of the insurer's tax advisors; to be accounted for separately from the premium. |
| Duration | Typically seven years; in the case of certain types of taxes, a later start date for the statute of limitations, or future risks, the period may be longer. |
| Reporting Mechanism | Claims-Made Structure: The claim or potential claim must be reported within the policy term. |
| Payment | Depending on the structure, either as soon as the obligation to pay arises or the stay of enforcement is denied, or only after a final determination has been made |
| Underwriting Basis | Tax opinion, factual documentation, exposure calculation, and representation letter. |
Auch eine gezeichnete Tax-Police ist nur so belastbar wie ihr Wortlaut. Ausschlaggebend ist das Zusammenspiel von Tax Liability, Ausschlüssen, Wissenszurechnung, Gross-Up, Recovered Amounts und Mitwirkungsrechten. Marktstandards unterscheiden sich dabei je nach Versicherer, Risikoart und Jurisdiktion erheblich. Im Einzelnen:
The policy must specify the exact additional tax liability that may arise from an official audit of the insured item. The type of tax, the time period, the legal entity affected, the triggering event, and the covered ancillary items must be described precisely. If the definition is too narrow, the actual audit by the tax authorities may fall outside the scope of coverage; if it is too broadly worded, it creates risks of interpretation in the event of a claim.
The exclusion should be limited to post-contractual changes to the relevant legal basis. A subsequent differing interpretation by tax authorities or the courts should not automatically be treated as a change in law.
The policyholder regularly confirms the facts as reported. The key question is whether these statements are considered objective or are limited to the actual knowledge of specific individuals. Attributing knowledge to advisors, employees, or unaffiliated individuals should be avoided.
The insurer should conduct its own tax assessment and should not rely on the policyholder’s tax advice. In addition, it must be determined whether and to what extent rights of recourse against advisors, members of the governing body, or employees are excluded.
If the insurance benefit is taxable and the insured tax itself was not deductible, a coverage gap will arise without a gross-up. The gross-up must therefore be clearly reflected in the calculations and the contract; a mere mention in the contract text is not sufficient.
It must be determined whether tax relief, refunds, recovered amounts, or other economic benefits reduce the insurance benefit or trigger subsequent repayment obligations. This mechanism can be economically relevant, particularly in the context of conversions, real estate transfer tax, and income tax risks.
Für den Versicherungsnehmer kommt es darauf an, ob die Police erst bei finaler Festsetzung zahlt oder bereits dann, wenn Liquidität tatsächlich benötigt wird. Gerade bei Betriebsprüfungen, Einspruchsverfahren und Aussetzung der Vollziehung kann das den wirtschaftlichen Wert der Police bestimmen.
Tax policies typically include rights of information, consent, and participation for the insurer. These must remain practicable. The policyholder must not be prevented from acting in dealings with the tax authorities.
In the case of transactions, refinancing, or subsequent exits, it should be determined whether claims under the policy can be assigned to buyers, group companies, or lenders, and what approval requirements apply.
In the first stage, we assess whether the risk is suitable for a market approach and which insurers are realistic candidates for this. Based on this, we can obtain indicative feedback from the market. Only once an insurer with the appropriate risk appetite has been selected does the actual underwriting process begin, which includes a Q&A, tax review, exposure reconciliation, and negotiation of the policy wording.
Die Dauer der Policenplatzierung hängt stark von Komplexität und Dokumentationsstand ab. Eine erste Marktrückmeldung liegt häufig innerhalb weniger Arbeitstage vor; die Platzierung selbst dauert je nach Komplexität und Dokumentationsstand mehrere Wochen.
Für eine Ersteinschätzung sind Mindestinformationen notwendig, ohne die Versicherer keine belastbare Indikation abgeben können.
The following are particularly helpful:
The better the facts and the tax assessment are prepared, the faster it can be determined whether a market approach makes sense.
Tax Liability Insurance is particularly relevant in situations where a known tax liability ties up capital, complicates negotiations, or blocks a business decision. This applies to buyers and sellers in M&A transactions, private equity and venture capital investors, funds, asset managers, family offices, strategic companies, insolvency administrators, managers with equity participation programs, and companies undergoing restructuring, tax audits, or dealing with outstanding tax liabilities.
Outside of M&A, the focus is less on purchase price logic and more on limiting liquidity risks, managing open tax positions with regulatory bodies, and hedging specific structuring or tax audit risks. For insolvency administrators, the policy may be relevant if a known tax risk impedes the distribution of the estate, the conclusion of proceedings, or the risk assessment following the conclusion of proceedings.
For M&A attorneys, the added value lies primarily in not only allocating a known tax risk through contractual provisions, but also in consistently aligning tax covenants, indemnification, disclosure, and insurance coverage. For tax advisors, the key question is whether their tax analysis could, without proper safeguards, become the basis for the insurer’s right of recourse. Non-reliance, attribution of knowledge, and waiver of recourse must therefore be clarified from the very start of policy negotiations.
Tax valuation remains the responsibility of tax advisors. Risk Partners assesses whether a specific tax position can be presented in a market-consistent manner, which risk carriers are suitable for this purpose, and which policy structure makes economic sense. The decisive factor is whether the facts, the tax rationale, and the policy language all cover the same core risk.
How does Risk Partners provide support?
Für eine erste Einschätzung zur Versicherbarkeit genügt eine kurze Beschreibung des Sachverhalts, eine ausgearbeitete Opinion ist dafür noch nicht erforderlich.
Call us at +49 89 6223383-0 or email us at dealinsurance@riskpartners.de.
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.
