Cyber specialist CFC is introducing new transaction liability cover in Australia and offshore aimed at “micro” business owners wanting to sell, a segment which it says has been “all but ignored” by insurers.

About 20,000 SME transactions take place a year in Australia on average, a significant opportunity for brokers that CFC says has not been adequately served.

CFC says its new Private Enterprise policy addresses this overlooked segment.

"It is new in its application to the micro segment of the Australian market,” CFC Head of Transaction Liability Angus Marshall said.

“We’re proud to have developed the solution they need. Noone has focused on this segment of the market.

“It is offered at a compelling price point with a very streamlined process which is quite a departure from WI (warranty & indemnity) insurance in Australia, which usually requires sophisticated lawyers, brokers and underwriters,” he tells insuranceNEWS.com.au.

The Australian product, which was painstakingly designed specifically for the local market, covers sellers of small businesses for damages and defence costs resulting from any claim against the seller for a breach of a representation or warranty (R&W) in the purchase agreement.

CFC estimates there are nearly half a million SME M&A transactions a year globally – around ten times the number of deals in the current transaction liability addressable market.

“This important insurance cover has been widely adopted in the mid-market and we believe the micro segment represents the next sector of growth,” Mr Marshall said. “They need insurance that is relevant to smaller businesses like them at a price they can afford and that is simple to understand.”

Unlike other transaction liability policies which typically provide a policy limit of around 10% of enterprise value (EV), CFC’s Private Enterprise policy insures the full indemnity given by sellers. The product also offers a fixed wording and streamlined underwriting to enable brokers who may not have extensive M&A experience secure coverage for their clients quickly and efficiently.

“There really wasn’t a product in the SME micro end to give the certainty and peace of mind when exiting a business that they can exit with the sale-price proceeds in their pocket and protect that in a way that they have never been able to do before,” Mr Marshall said.

“This product is really there for businesses just not serviced at all,” he said. “This is a sophisticated product made simple.”