In Turkish M&A practice, warranty and indemnity insurance, often shortened to W&I insurance and sometimes called representations and warranties insurance, is increasingly discussed whenever the parties want to reduce post-closing recourse against the seller. The commercial idea is simple: instead of leaving the buyer’s main recovery path entirely against the seller under the SPA, an insurance policy is used to cover some of the loss caused by breaches of warranties or indemnities. In Turkey, that idea sits inside two legal frameworks at once. The first is general Turkish contract law, which gives parties broad freedom to shape warranties, indemnities, and remedies. The second is the Turkish insurance regulatory framework, under which the insurance sector is supervised by the Insurance and Private Pension Regulation and Supervision Authority, or SEDDK, under Insurance Law No. 5684 and the Turkish Commercial Code.
That dual structure explains why W&I insurance in Turkish M&A deals is both attractive and technically delicate. It is attractive because Turkish private M&A practice already uses broad warranty and indemnity packages in SPAs, including warranties about title, authority, tax, accounts, litigation, intellectual property, employees, customer and supplier contracts, compliance, data privacy, and insolvency. It is delicate because Turkish insurance regulation is branch-based and market commentary in Turkey notes that W&I insurance is not expressly listed as a standalone insurance branch, which is one reason it is still not common in Turkish private M&A, even though demand for it is growing.
For that reason, a Turkish W&I discussion should not start with the question “Is W&I insurance legal in Turkey?” in the abstract. A better question is this: How does W&I insurance fit into Turkish contractual risk allocation, Turkish insurance regulation, and Turkish deal execution? Once that question is asked correctly, the role of the product becomes much clearer. It is not a replacement for careful due diligence, clear disclosure, or disciplined SPA drafting. It is an additional layer of transactional risk allocation that may, in the right deal, reduce the need for large escrows, deferred price holdbacks, or prolonged seller liability.
The Turkish legal baseline: W&I insurance is built on contract freedom, not on a special M&A statute
Turkish law does not have a dedicated statute that specifically regulates W&I insurance as an M&A product. Instead, the product rests on the general principles of the Turkish Code of Obligations. The Code allows parties to determine the content of their contracts freely within the limits of the law, while also providing that agreements contrary to mandatory law, morality, public order, personality rights, or impossibility are null. It further provides that a party that fails to perform its obligation duly must compensate the resulting loss unless it proves absence of fault. In the M&A context, those rules are what allow the SPA to create the warranty and indemnity architecture in the first place, and what then allow the insurance policy to sit beside that architecture as a separate contractual instrument.
The same Code also matters because it sets limits on contractual overreach. Advance exclusions of liability for gross fault are null under Turkish law, and seller-friendly exclusions of defect liability are also vulnerable where the seller acted with gross fault in transferring a defective subject matter. That matters directly for W&I insurance. The policy may soften the economic consequences of warranty breaches, but it does not erase Turkish mandatory-law limits around gross misconduct, deliberate concealment, or structurally unfair contractual drafting. In other words, Turkish law supports sophisticated transactional risk allocation, but it does not convert W&I insurance into a universal safe harbor for every type of seller conduct.
The insurance-law baseline: why the Turkish regulatory angle matters
On the insurance side, SEDDK’s official annual reports show that the Authority is the public legal entity responsible for regulating and supervising the insurance and private pension sectors, and that its powers operate under Insurance Law No. 5684, the Turkish Commercial Code No. 6102, and related legislation. The same reports state that operations regarding licensing, merger, share transfer, portfolio transfer, and title change of insurance, reinsurance, and pension companies are evaluated within this framework. They also show that companies are evaluated by reference to the insurance branches in which they intend to operate, alongside shareholder reputation, capital adequacy, organizational structure, and other prudential criteria.
This is important for W&I because Turkish insurance regulation is not product-neutral in a loose, informal sense. It is organized through a supervised branch system. Market commentary on Turkish private M&A therefore notes that W&I insurance is not explicitly listed as an insurance branch and, for that reason, local insurers do not usually provide it as a standard, clearly categorized domestic product. The same commentary explains that Turkish private M&A still uses W&I only selectively and that the product is not yet common practice in the local market, even though interest has grown. That observation fits the regulatory picture reflected in SEDDK’s branch-centered supervision model.
Why parties use W&I insurance in Turkish deals
In a Turkish acquisition, the classic buyer concern is not simply that the seller gave warranties. It is whether the seller will remain solvent, cooperative, reachable, and commercially relevant if a serious claim arises after closing. This concern becomes sharper in private-equity exits, founder sales, auctions, cross-border disposals, and deals where sellers want a clean break rather than a long tail of post-closing liability. Turkish market commentary on W&I insurance explains that one reason parties look at the product is precisely to reduce dependence on traditional security techniques such as large escrow accounts, deferred price retention, or bank and parent guarantees, all of which can be costly, slow, or commercially unattractive.
For sellers, W&I insurance may improve exit cleanliness. For buyers, it may provide a more creditworthy or more practical recourse route than suing a founder, a fund nearing distribution, or a seller group that no longer has a strong Turkish footprint after closing. In Turkish practice, that logic is particularly appealing where the SPA already contains a mature warranty schedule and the parties want to shift at least part of the post-closing risk to a third-party insurer. But that only works if the policy, the SPA, and the disclosure process are aligned carefully.
What the insured risk usually looks like in a Turkish transaction
The insured risk in a Turkish W&I deal is usually built on the underlying SPA warranties. Turkish private M&A practice, as summarized in the 2024 Practical Law country Q&A for Turkey, shows that warranties and indemnities in SPAs commonly cover the seller’s title to the shares or assets, the target’s share capital and group structure, assets and property, authority to enter the transaction, tax, accounts and financial records, litigation, intellectual property and IT systems, employees, customer and supplier agreements, compliance with applicable law, data privacy, and insolvency. That matters because a W&I policy does not insure “the deal” in the abstract. It insures a negotiated warranty package derived from the SPA.
That point is easy to miss in practice. Buyers sometimes talk about W&I insurance as though it were a substitute for negotiating the warranties properly. In Turkish law and Turkish deal practice, it is the opposite. A weak or vague warranty package produces a weak or vague W&I policy. If the SPA does not define what was promised, the insurer cannot credibly price or cover the breach of that promise. A Turkish W&I transaction therefore begins with a strong SPA warranty section and only then moves into insurance design.
Why disclosure letters matter even more when W&I insurance is used
A disclosure letter is already one of the most important tools in a Turkish SPA because Turkish law pays close attention to buyer knowledge and to defects known or discoverable at the time of the contract. Under the Turkish Code of Obligations, the seller is generally not liable for defects known by the buyer at the time of the sale, and known or fairly disclosed issues commonly move outside the ordinary warranty-claim logic. In W&I insurance, this becomes even more important, because Turkish market commentary identifies disclosed information and issues already known by the insured party through disclosure letters or due diligence as common exclusions from coverage.
This means a Turkish buyer cannot expect W&I insurance to rescue a weak disclosure process. If a matter was disclosed or actually known, it will often fall outside the insurable risk perimeter. In practice, the policy and the SPA will often be negotiated on the assumption that unknown breaches of warranty are the core insured risk, whereas known problems are expected to be handled through price adjustment, specific indemnity, remediation before closing, or express contractual carve-outs. In Turkish deals, therefore, the disclosure letter and the W&I policy are not separate worlds. They are two sides of the same risk-allocation system.
Buyer-side and seller-side policies
Turkish market commentary explains that W&I insurance can be structured on either a buyer-side or seller-side basis. In a seller-side structure, the seller is insured for its own innocent misrepresentations, while in a buyer-side structure the buyer is the beneficiary that can claim directly against the insurer for breaches covered by the policy. The same commentary notes the practical advantage of a buyer-side structure: it allows the buyer to pursue the insurer directly, rather than depending on the seller to activate and manage the claim process first.
From a Turkish transactional perspective, buyer-side policies are often easier to reconcile with a seller’s clean-exit objective, because the buyer’s main recourse route is moved away from immediate direct claims against the seller for covered breaches. But they do not eliminate the need to coordinate the seller’s liability regime under the SPA. A buyer-side policy may still leave some matters outside coverage, some retention or excess with the insured, and some claims directly against the seller, especially for fraud, known issues, or matters expressly carved out from the policy. The policy structure should therefore be read together with the SPA’s liability cap, time limits, specific indemnities, and fraud carve-outs.
Common exclusions in Turkish W&I practice
Market commentary on Turkish W&I practice points to a familiar set of exclusions. These typically include price adjustments, administrative and criminal fines and penalties, disclosed information, matters already known by the insured party, punitive or exemplary damages, and fraud by the seller. The same commentary also notes that insurers may impose tailored exclusions based on their own review of the transaction, due diligence findings, or sector-specific risk.
These exclusions matter greatly in Turkish deals because they show where the policy stops and the SPA must continue working on its own. If purchase-price adjustment disputes are excluded, then the buyer must still rely on the SPA’s completion accounts or locked-box framework. If fines and penalties are excluded, regulatory risk may still need to be covered by a specific indemnity. If disclosed matters are excluded, the seller must decide whether disclosure alone is enough or whether a separate commercial solution is needed. In Turkey, W&I insurance is therefore best understood not as a total replacement of seller liability, but as a targeted overlay on top of a carefully drafted SPA.
Due diligence remains central because the insurer relies on it
One of the most important practical features of W&I insurance is that it does not replace due diligence; it intensifies it. Turkish market commentary explains that insurers commonly engage legal, tax, and financial advisers when assessing the risk and drafting the content of the policy, and that the insurer’s own assessment of the transaction can lead to exclusions or narrower coverage. The same commentary also links coverage exclusions directly to matters known from due diligence or disclosure.
This has a very concrete implication in Turkish M&A. A buyer cannot expect to run shallow diligence and then obtain broad W&I coverage for whatever it failed to investigate. A seller cannot expect to present a poorly documented disclosure process and still have a clean, inexpensive W&I placement. The policy market depends on the diligence record. In Turkish deals, the more disciplined the diligence, disclosure, and warranty drafting are, the more credible the insurance process becomes.
Gross fault, fraud, and the limits of insurance-backed risk transfer
Turkish law’s treatment of gross fault is especially important in W&I structuring. Because the Turkish Code of Obligations invalidates advance exclusions of liability for gross fault, and because seller-friendly attempts to neutralize liability become vulnerable where gross fault is present, parties should be cautious about assuming that the policy and the SPA together can make seller misconduct commercially irrelevant. Market commentary also identifies seller fraud as a common exclusion from W&I coverage.
The result is a legally and commercially coherent pattern. Innocent or negligent breaches of warranty may be a suitable subject for W&I coverage. Fraudulent concealment or grossly improper conduct is much harder to shift cleanly into the insurance box. In a Turkish transaction, this means the policy is usually strongest as a tool for managing unknown and non-fraudulent warranty risk, not as a shield against dishonesty. Buyers and sellers should therefore resist treating W&I as a universal substitute for fraud carve-outs, management interviews, and serious diligence on high-risk areas.
Survival periods, liability caps, and SPA-policy alignment
A Turkish W&I policy works best when it mirrors the commercial architecture of the SPA. Turkish private M&A practice commonly uses liability caps, limitation periods, indemnification mechanics, and disclosure schedules in the SPA. Market commentary on W&I insurance notes that the survival periods of the warranties in the acquisition agreement should be reflected in the policy, and that buyers sometimes seek broader or longer protection through the insurance layer than through direct seller liability alone.
That alignment is critical. If the SPA says a warranty survives for one period but the policy says something different, disputes can arise over timing. If the SPA defines loss one way and the policy defines it another way, a claim may be covered contractually but not insurably, or vice versa. If the SPA uses de minimis thresholds, baskets, or specific indemnity regimes that the policy does not reflect properly, the parties may not discover the gap until a claim arises. In Turkish M&A, policy procurement should therefore be treated as a drafting exercise coordinated with the SPA, not as a post-signing bolt-on.
Retention, uninsured gaps, and why W&I does not eliminate all seller risk
Even where W&I insurance is obtained, not all risk disappears. Turkish market commentary explains the concept of retention, meaning the part of the loss that remains outside immediate insurer recovery and must be borne by the insured or otherwise allocated. The same commentary notes that buyers may still insist on a separate indemnity or other recourse for gaps in coverage, including matters outside the policy or below the retention level.
This is why W&I insurance in Turkey should not be oversold as a product that automatically produces a zero-recourse seller exit. Depending on the policy structure, the sector, the diligence findings, and the carve-outs, some matters may remain squarely with the seller. The real transactional value of W&I often lies in shrinking that zone of direct seller exposure and improving recoverability for the buyer, not in abolishing all seller liability in every case.
Dispute resolution: coordinate the SPA and the policy
Dispute-resolution design is another issue Turkish deal teams sometimes underestimate. Cross-border Turkish M&A deals often use arbitration, and Turkey’s International Arbitration Law applies to disputes with a foreign element where the seat of arbitration is Turkey or where the parties select the law. That statute gives parties significant room to shape arbitral procedure. The problem in W&I transactions is that the SPA and the insurance policy may not always follow the same dispute-resolution path unless coordinated deliberately.
That matters because a buyer may end up pursuing the seller under one forum clause and the insurer under another, or may find that one dispute turns on facts being litigated elsewhere. In Turkish W&I practice, this does not mean the policy and SPA must always use the same forum. It means the parties should think through how claim notice, insurer involvement, insured cooperation, and underlying breach disputes will interact before the documents are finalized. The more complex the deal, the more important this coordination becomes.
Why W&I is still selective in Turkey
Although W&I insurance is increasingly discussed in Turkish transactions, market commentary still describes it as not yet common in Turkish private M&A and explains that local insurers do not usually offer it as a standard standalone branch product. Some commentary also notes that parties in Turkey often reach foreign insurers through local brokers when they want this kind of coverage, and that the lack of an expressly developed domestic regulatory-product framework has slowed broader market adoption.
This selective adoption should not be misunderstood as legal impossibility. It is better understood as a market-maturity point. Turkey has a supervised insurance sector, active M&A practice, and a legal framework that can support sophisticated risk allocation. But W&I still requires more structuring effort than in jurisdictions where the product is already a routine domestic-market tool. In practice, that means W&I is currently most credible in larger, more sophisticated, or more international Turkish deals where the parties are willing to bear the documentation and underwriting discipline the product requires.
When W&I is most useful in a Turkish deal
In Turkish practice, W&I is usually most useful when the deal has one or more of the following characteristics: a seller that wants a clean exit, a buyer that does not want to depend entirely on seller solvency, a competitive auction where broad seller recourse is commercially hard to negotiate, a cross-border transaction with sophisticated diligence, or a deal where escrow and deferred-price mechanisms are commercially unattractive. It is especially useful where the warranty package is already mature and the issue is not whether the risk can be described, but who should bear it after closing.
By contrast, W&I is usually less suitable where diligence is weak, disclosure is chaotic, the target has major known compliance problems, or the parties are hoping that the policy will cure fundamental uncertainty in the deal itself. In Turkish law and market practice, W&I works best as a disciplined enhancement of a well-structured transaction, not as a substitute for basic deal hygiene.
Conclusion
Warranty and indemnity insurance in Turkish M&A deals is best understood as a sophisticated but still selective overlay on the standard Turkish SPA risk-allocation model. Turkish law gives the parties room to negotiate detailed warranties, indemnities, caps, and survival periods, while Turkish insurance regulation subjects insurers to a branch-based supervisory framework under SEDDK. Market commentary in Turkey indicates that W&I is not yet a common, expressly categorized domestic insurance product, but interest is growing and the tool is increasingly considered in more complex and cross-border deals.
The practical lesson is simple. In Turkey, W&I insurance can be very useful, but only when it is treated as part of the whole transaction structure. It should be aligned with the SPA warranty package, the disclosure letter, the diligence record, the limitation and notice regime, and the dispute-resolution design. When those elements work together, W&I can reduce friction, improve recourse, and support cleaner exits. When they do not, the policy may add cost without eliminating the core legal risks the parties thought they had transferred.
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