Mid-market insurance

Insurance when an IT company takes investment or is sold

Reviewed by the Apex broking team · Last reviewed 2026-11-04

Deal insurance planning is the work of reviewing, adjusting and running off an IT company's policies when it takes investment or changes ownership. Getting it wrong can leave past projects and past board decisions uninsured.

Part of: IT and technology business insurance

The short answer

When an IT company takes private equity or venture investment, or is sold, its insurance becomes part of the deal. Investors and buyers review the programme in due diligence, the transaction itself can trigger change of control clauses in your policies, and claims-made covers such as tech PI, cyber and D&O usually need run-off or continuity arrangements so that past work and past decisions stay insured. What investors typically expect is set out in insurance your investors will ask for.

Start the insurance workstream early. Changes made in the last week before completion are harder to negotiate and easier to get wrong.

What investors and buyers look at

Insurance due diligence for a £10m to £50m IT business commonly covers:

• A schedule of every policy, insurer, limit, excess, period and retroactive date
• Whether limits match the caps and indemnities in your largest client contracts
• Claims, notified circumstances and security incidents for at least five years
• Cyber controls and any incident that was handled without a claim
• US or other overseas revenue and whether territory and jurisdiction fit
• D&O cover, including how it responds to investor claims and the investor directors who will join the board
• Any gaps or exclusions that a buyer might ask you to price into the deal

Investor directors often make D&O a condition of joining the board. See D&O when raising investment and do VC investors require D&O. Company law allows this: under the Companies Act 2006, section 233 a company may buy insurance for its directors against the liabilities mentioned in section 232(2), which otherwise makes void most provisions by which a company indemnifies a director against liability for negligence, default, breach of duty or breach of trust in relation to the company.

Change of control and run-off

Most commercial policies contain a change of control clause. Wordings vary, but the commonest effect is that cover continues for acts before the transaction and stops, or needs insurer agreement, for acts after it. How that plays out depends on the policy.

Six years is a common choice for D&O and PI run-off because it reflects the main limitation period for simple contract and most tort claims (see the Limitation Act 1980 overview), though claims on deeds and some latent damage claims can be brought later, so the right period depends on the risk. See D&O run-off on sale, PI run-off cover explained and cyber run-off and extended reporting periods.

If the buyer takes over your tech PI and continues it, the key detail is the retroactive date. If the buyer's policy uses a new retroactive date from completion, your past work is not covered by it. See retroactive dates explained.

Warranty and indemnity insurance

Warranty and indemnity (W&I) insurance is a separate transactional product. It covers loss from breach of the warranties given in the sale agreement, so that a buyer can claim against the policy rather than the sellers. It is placed for the deal and is not part of your operating programme. It also usually excludes matters the buyer already knew about, so it does not replace your own tech PI, cyber or D&O run-off. Whether it is used is a commercial decision between buyer, sellers and their advisers; see warranty and indemnity insurance explained.

Disclosure of known incidents

A transaction often surfaces things that were never reported to insurers: a dispute with a client, a near miss on a migration, a phishing incident. Two rules matter. First, if a matter could give rise to a claim, notify it as a circumstance to the current insurer before the policy changes; see circumstance notification explained. Second, when the business or its buyer next buys cover, the Insurance Act 2015, section 3 requires disclosure of every material circumstance the insured knows or ought to know, or enough to put a prudent insurer on notice. Facts disclosed in the data room are likely to be known to the people buying the next policy. See fair presentation under the Insurance Act 2015.

Illustrative examples

• Illustrative. An IT services company is sold to a larger group. Its tech PI ends at completion and the buyer's group policy adds it with a retroactive date of the completion date. Eighteen months later a client sues over a project delivered before the sale. With no run-off, neither policy responds.
• Illustrative. A software business takes private equity. The investor asks for higher D&O limits and a review of cyber controls. The board notifies a minor client complaint as a circumstance before the new D&O and PI terms incept, so the old policy keeps it.

After the deal: group programmes

After acquisition, buyers usually bring the business into a group programme. That can bring broader wordings and higher limits, but the limits are often shared across group companies. Check that every entity is named, that retroactive dates are preserved, that IT-specific cover such as tech PI is not replaced by a generic PI wording, and that shared limits are still enough for your contracts. See group companies insurance programmes, managing PI cover through a merger and D&O for tech companies.

Common mistakes

• Leaving insurance until the week before completion
• Letting a buyer's policy reset the tech PI retroactive date
• Assuming W&I covers the company's own professional liability
• Not notifying known circumstances before policies change
• Missing a material change notification to insurers when investment changes the business

What to do

1. Give your broker the deal timetable and structure as soon as heads of terms are agreed.
2. Prepare a full policy schedule for the data room.
3. Agree run-off periods for tech PI, cyber and D&O in the transaction documents.
4. Notify circumstances before completion.
5. Map how each policy will move into any group programme.

For the wider programme, see insurance for mid-sized IT companies and IT and technology business insurance.

Apex arranges tech PI, cyber, D&O and run-off for IT companies going through investment or sale; a broker reads every enquiry.

Sources

• Companies Act 2006, section 233: provision of insurance
• Companies Act 2006, section 232: provisions protecting directors from liability
• Insurance Act 2015, section 3: duty of fair presentation

Frequently asked

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.