Warranty and indemnity (W&I) insurance is a policy that pays out on warranty and indemnity claims instead of, or alongside, the seller. For a seller, buy-side W&I is what lets you walk away from completion with a genuinely clean exit.
Technically, it is an insurance policy covering losses from breach of the warranties or indemnities in the sale agreement. It can be structured buy-side, where the buyer holds the policy and claims against the insurer, or sell-side, where the seller holds it, with buy-side being far more common.
Buyers like W&I because it lets them negotiate a full warranty schedule without leaving the seller exposed enough to fight hard over every clause, since the insurer is who actually pays. Sellers like it because it can replace or reduce the escrow, holdback, or personal exposure they would otherwise carry after completion.
The policy does not remove seller exposure entirely. Insurers exclude known issues (anything flagged in diligence is usually carved out), apply their own retention before cover starts, and can still pursue the seller directly in cases of fraud or deliberate non-disclosure. A policy on paper is not the same as a clean exit in practice.
What you as a seller should push back on: being asked to retain meaningful personal exposure alongside a W&I policy that was sold to you as a full replacement for it. Get clarity early on what the insurer’s diligence process will exclude from cover, since that becomes exposure you still carry.