Escrow and W&I insurance in Middle East M&A

A buyer pays the price at closing, and much of what it has bought only becomes apparent afterwards. Accounts can turn out to have been optimistic, a tax position can be reopened, a title can be defective, and by then the seller has the money. Managing that gap is one purpose of the post-closing provisions in a sale and purchase agreement.

Warranty and indemnity insurance, usually shortened to W&I, addresses part of that gap. Under a buyer-side policy, the buyer takes out cover against certain warranties given about the business turning out to be wrong, and the insurer responds to covered loss on the terms of the policy, reducing the buyer’s reliance on recourse against the seller. Policies can also be written seller-side.

Marsh received more than 100 W&I insurance inquiries across the Middle East and Africa in 2025. Separately, and describing the deals Marsh placed rather than those inquiries, most ran between US$50 million and US$350 million, with outliers between US$1.5 billion and US$2.5 billion, and domestic transactions accounted for 44% of deals placed, outbound 32% and inbound 24%.

Marsh’s summary figures for the same region excluding Israel record buyer-side policies at 82% of the total against 18% seller-side, and private equity accounting for 39% of placements against 61% corporate. The same page records US$1.5 billion of transactional risk limits placed, an average deal size of US$438 million and a median of US$390 million. Marsh records activity concentrated in the GCC, with the UAE and Saudi Arabia driving growth, without attributing a share to either country. Neither set is a Gulf figure. Norton Rose Fulbright’s Insurance Foresight 2025 mid-year review found nearly two thirds of respondents expecting use of W&I and R&W cover to rise that year, with growth anticipated to be more pronounced in the Middle East and in South and South East Asia. Lockton put regional appetite at a historic high in 2024, while noting adoption still sits behind the UK, Europe and the US.

Where cover stops

Cover has become more precisely bounded at the same time. Sidley’s May 2026 update records more carefully drafted carve-outs around conflict, civil unrest and sanctions exposure, with exposure to sanctioned jurisdictions falling outside insurer appetite, and higher-risk jurisdictions liable to attract a specific exclusion. The update also describes insurers as increasingly reluctant to absorb an identified risk where material exposure has not been addressed in the transaction, and says the excluded risk should not be left as an unintended gap between the seller’s limited liability and the insurer’s exclusion.

That last point is the one that reaches the escrow.

What still sits outside the policy

• Purchase price adjustment. The parties agree a working capital target at signing, being the cash tied up in the trading cycle through receivables and inventory less payables, and completion accounts drawn up afterwards fix the position as it actually stood. The difference is paid one way or the other, and a W&I policy does not respond to the purchase price adjustment itself. The related deferred payment structures raise the same fundholding question.
• An identified risk. Where diligence has turned up a material issue, the insurer will often exclude it or require it to be dealt with separately, and the parties may agree to hold an amount against that single exposure.
• A specific indemnity. The seller promises to pay for one named problem already identified, with identified tax or title matters being possible examples, and the amount held would track the estimated exposure.

Where any of these is funded through escrow on an M&A transaction, the amount tracks a defined exposure. Tenor is worth attention, since the seller’s liability under the sale and purchase agreement, the amount held and any scheduled reduction in it, and the claim notification provisions can all end at different points.

The release mechanism is where this becomes operational. Titanium can act on an instruction or a document it can verify without determining the dispute underneath it, so a closing letter from the tax authority, a filed release, a signed expert’s determination, or a joint instruction from the authorised signatories. A condition framed around whether a party is satisfied that a matter has been resolved is one Titanium cannot administer. We will review a proposed mechanic and confirm whether we can operate it, though the drafting remains with the parties and their counsel. Our note on escrow release conditions sets out what we can work with and what an agreement should cover where instructions conflict.

Why does a purchase price adjustment sit outside the policy?

A purchase price adjustment is a calculation rather than a breach, so a warranty policy has nothing to respond to.

The final price is settled on completion accounts drawn up afterwards. The parties agree a target at signing, the accounts fix the position as it stood, and the difference is paid one way or the other. Warranty and indemnity cover responds to a breach of the warranties given about the business. An adjustment is neither a breach nor a claim against a warranty, so it falls outside the policy entirely.

Why does a problem found in diligence sit outside the policy?

Where diligence identifies a material issue before signing, the insurer will usually exclude it, so the parties are left to allocate that exposure between themselves.

Insurers price unknown risk. An issue already on the table is a known exposure, and market practice is to carve it out of the policy or require it to be dealt with separately in the transaction documents. Where the parties agree that the seller carries it, the buyer will generally want an amount set aside until the point is resolved.

How often does an insured deal still open an escrow?

In every year from 2020 to the third quarter of 2024, between 83% and 94% of deals identified as carrying representations and warranties insurance also opened a separate purchase price adjustment escrow.

Year	Deals opening a separate purchase price adjustment escrow
2020	89%
2021	90%
2022	94%
2023	88%
2024, Q1 to Q3	83%

Source: SRS Acquiom, 2025 M&A Working Capital Purchase Price Adjustment Study, slide 31, “Separate PPA Escrows: Effect of Reps and Warranties Insurance”. Deals on which insurance was identified.

The share has fallen each year since 2022. A single figure taken from the middle of that series would misrepresent it, which is why the whole series is set out.

The same study, across all deals rather than the insured subset

The median separate purchase price adjustment escrow was about 1% of transaction value in each of the last two years covered by the study.

By year, as a percentage of transaction value: 0.67% in 2020, 0.62% in 2021, 0.88% in 2022, 1.00% in 2023 and 0.98% in the first three quarters of 2024. The share of deals opening one, across the same years, was 69%, 72%, 73%, 70% and 76%.

These figures describe all deals in the study, not only the insured subset. The study records that the median tracks the average initial purchase price adjustment claim of 0.9% of transaction value, and that 24% of initial claims exceeded 1% of transaction value.

Source: SRS Acquiom, 2025 M&A Working Capital Purchase Price Adjustment Study, slide 30, “Percentage of Deals with PPA Escrow and Median Sizes”, and slide 13 for the claim size.

Does this apply to a locked box deal?

No. A transaction settled on a locked box basis has no post-completion purchase price adjustment, so the first of the two points does not arise.

The study population is deals with a finalised purchase price adjustment, which means completion accounts transactions. Locked box structures fall outside that population. The second point, the problem identified in diligence, arises on either structure.

What the data does not show

The purchase price adjustment escrow figures come from deals on which SRS Acquiom acted as shareholder representative. The study covers 1,250-plus private-target acquisitions worth $298 billion, closed from 2020 through the third quarter of 2024, each with a finalised purchase price adjustment. It does not state target geography, and 15% of buyers in the sample are based outside the United States.

The study also records that insurance was identified on approximately half the deals, and that buyers do not always disclose a buy-side policy. Its comparison series for deals where no insurance was identified is therefore contaminated by an unknown number of insured deals, and is not reproduced here.

Where escrow comes in

Escrow is one way for the parties to hold funds against an obligation the policy does not cover. Whether it is appropriate on a given matter is for the parties, their counsel and the insurance broker to determine. Titanium does not advise on the policy or on the allocation of transaction risk. The questions that arise once that decision is taken are set out in our note on appointing an escrow agent.

Titanium’s role is narrow. We hold funds in a segregated client account and release them against a valid authorised instruction, in accordance with the escrow agreement and subject to applicable law and regulatory requirements. We take no view on the merits of an underlying claim.

Common questions

When can the parties fund?

Once KYC is complete and the escrow agreement is signed, the parties may fund, typically within a few days.

How is the fee quoted?

Titanium provides a capped fee quotation for the mandate at the outset, plus VAT.

Is escrow still used where there is a W&I policy?

On the data above, yes, on most insured deals. The policy covers breaches of the warranties. A purchase price adjustment is a calculation and a known problem is usually excluded.

Who is insured under a warranty and indemnity policy?

The buyer, in the large majority of cases. Buyer-side policies were 82% of Marsh’s Middle East and Africa placements in 2025. Sellers frequently initiate the policy in an auction, but the insured party is the buyer.

Does the price adjustment amount have to sit in escrow?

That is a matter for the parties and their counsel. The study records only how often a separate escrow was opened and how large it was.

Where do the figures come from?

SRS Acquiom’s 2025 M&A Working Capital Purchase Price Adjustment Study, slides 13, 30 and 31, and Marsh’s Transactional risk insurance 2025: Year in review, pages 58 and 61. Both are the publishers’ own reports rather than summaries of them.

Does Titanium advise on the W&I policy?

No. Titanium acts as escrow agent. The policy, its exclusions and the allocation of transaction risk are matters for the parties, their counsel and the insurance broker.

What happens if one party refuses to sign a release instruction?

The escrow agreement governs the position. Titanium holds or releases the funds in accordance with the instructions and documentary requirements set out in that agreement.

How are client funds held?

Client funds are held separately from Titanium’s operating funds under the applicable client money arrangements. Emirates NBD is a banking partner for client accounts.

Sources

• 2025 M&A Working Capital Purchase Price Adjustment Study, SRS Acquiom, January 2025. Slide 13, initial claim sizes. Slide 30, “Percentage of Deals with PPA Escrow and Median Sizes”. Slide 31, “Separate PPA Escrows: Effect of Reps and Warranties Insurance”
• Transactional risk insurance 2025: Year in review, Marsh. Page 58, “At a glance: Middle East and Africa”, excluding Israel. Page 61, inquiry volume, transaction types and deal sizes
• W&I Insurance in the Middle East Amid Heightened Geopolitical Risk, Sidley, 21 May 2026
• Popularity of deal insurance set to soar, Norton Rose Fulbright, Insurance Foresight 2025 mid-year review
• Q&A: Warranty and indemnity insurance in the Middle East, Financier Worldwide with Lockton, July 2024

Titanium Financial Ltd is authorised and regulated by the Financial Services Regulatory Authority of Abu Dhabi Global Market for Providing Custody and Providing Money Services. The permission was granted on 26 November 2020 and is verifiable on the ADGM public register.