the memo your capital partners want.

Before a capital partner funds an independent sponsor deal, it wants a short insurance memo. Findings should be in dollars, with an owner and a date for every open item.

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four questions, in dollars, before a capital partner funds.

The short answer. The memo answers four questions: what the target is insured for today, what the go-forward program will cost against the model, which one-time costs land at closing, and who is protected at the sponsor, the acquisition vehicle, and the board. Findings should be in dollars, with an owner and a date for every open item.

By Nick McClish, Managing Partner · 8 min read · Reviewed October 13, 2026

what are the key takeaways?

1
Today’s program.
Named insureds, lines, limits, and what the file actually shows.
2
Go-forward cost.
A range against the model, separate from one-time closing items.
3
Who is protected.
Board designees, the sponsor, and the vehicles in the stack.

why do capital partners ask for an insurance memo?

Capital partners read the insurance work, not just the QoE. Peony’s independent sponsor data room checklist lists an insurance coverage summary, including D&O, reps and warranties, and key person, among the deal-structure documents released to the one or two capital partners moving to commitment. Source.
An insurance advisor is a named diligence seat. independentsponsor.io lists the typical third-party advisors as a QoE provider, buy-side counsel, and often an environmental consultant and insurance advisor, and says findings must flow back into the deal model and investor memo. Source.
The capital stack is more institutional. In Citrin Cooperman’s 2026 Independent Sponsor Report, a March 2026 survey of 187 professionals, 61% of sponsor respondents named SBIC funds as a capital source, up from 34% in the 2023 edition, and 53% said they often use the same funding partners. Repeat relationships make a clean diligence record worth more. Source.
Post-close insurance problems hit the investors, not only the company. McGuireWoods (July 2026), writing about private equity funds and their portfolio companies, lists recurring ones that apply equally to independent sponsor deals: coverage gaps across holding companies, blockers, and investing vehicles; fund and portfolio-company insurers each claiming the other is primary; claims-made policies cancelled at closing without a tail; cyber timing gaps; capacity exclusions against sponsor representatives who serve as directors; and insured-versus-insured exclusions in disputes with co-investors. Source.

what belongs in a one-page insurance memo?

Use this as the insurance section of the investment memo, or as a standalone exhibit in the investor data room.

Eight sections of the capital-partner insurance memo
Section	What it answers	Evidence behind it
1. Entity and insured map	Which entities are named insureds: operating company, subsidiaries, holding company, blocker, deal vehicle, sponsor management company	Org chart against each policy’s named insured schedule
2. Current program snapshot	Lines carried, limits, retentions, carriers, expiration dates, annual premium	Declarations pages and the schedule of insurance
3. Findings in dollars	Go-forward premium versus the model, any QoE adjustment, one-time closing costs	Go-forward indications or ranges, and the QoE bridge
4. Claims history and open reserves	Frequency, severity, open claims, reserves that transfer, workers’ comp experience mod	About five years of currently valued loss runs per line, and the mod worksheet
5. Continuity at closing	Which policies end or change at closing; tails needed and who pays	Change-of-control and cancellation wording, and the purchase-agreement draft
6. Reps and warranties decision	Buying a policy or not, limit, retention, escrow, known-issue exclusions and the fix for each	Non-binding indications and the indemnity package
7. Sponsor and board protection	Whether portco D&O covers sponsor and capital-partner board designees; sponsor management liability; capacity and insured-versus-insured wording	Draft policy forms or endorsements
8. Lender deliverables and day-one plan	Certificates and endorsements the credit agreement requires; key person life if required; the first 100 days	Commitment-letter insurance section and the closing checklist

Each open item gets three fields: owner (sponsor, counsel, insurance agency, or seller), date, and deal treatment (price, special indemnity, escrow, closing condition, or post-close fix).

Section 7 is expanded in whether portfolio-company D&O covers the sponsor’s board designees.

which questions do capital partners actually ask?

Question to memo section
Capital partner question	Memo section
Is the insurance cost in the model realistic after we own it?	3
Did thin coverage or a low premium prop up EBITDA?	3
Are there open claims or reserves we are inheriting?	4
What does the company need to buy at closing, and who pays?	5
Is the sponsor buying reps and warranties insurance, and if not, what protects us instead?	6
If I take a board seat, am I covered under the company’s D&O?	7
Is our holding company, blocker, or acquisition vehicle insured under anything?	1 and 7
Does the sponsor carry its own management liability?	7
Will insurance hold up the lender’s closing conditions?	8
Who is responsible for insurance after closing, and when is the first renewal?	8

what should a capital partner confirm before co-investing?

This is the short answer to what insurance a capital partner should confirm before co-investing with an independent sponsor.

Confirmations before funding
Confirm	Why it matters	Ask for
The operating program fits the business under new ownership	Founder-built programs often carry only what contracts or lenders forced. Cyber and employment practices are common gaps.	Program snapshot and gap list with go-forward cost ranges
Go-forward premium is in the model	A higher premium after close is a recurring cost, not a one-time item	A QoE bridge line or a sponsor memo note
One-time closing costs are budgeted	D&O tail, often discussed as six years, replacement collateral on high-deductible programs, and reps and warranties premium and fees	Sources and uses lines for each
Claims-made continuity	Cancelling a claims-made policy without a tail can leave pre-close acts uninsured	A tail indication or run-off plan, and purchase-agreement language
Board designees are covered in their director capacity	Insurers may invoke a capacity exclusion when a sponsor or investor representative sits on the board	Portco D&O wording, or an endorsement on outside-director capacity
Insured-versus-insured wording is narrow	Disputes among the sponsor, the company, and co-investors can trigger the exclusion	A company-versus-insured formulation and carve-backs where available
Fund-level and company-level policies line up	Overlapping D&O, fiduciary, or cyber can stall payment while insurers argue over who is primary	Other-insurance and priority-of-payments wording
The sponsor’s own exposure is addressed	Independent sponsors raise capital deal by deal, which creates exposure similar to a fund manager’s, and often take board seats at the portfolio company	Status of a management liability policy for the sponsor and its vehicles
The reps and warranties decision is made, not defaulted	On a deal without that policy, escrow and special indemnities do the work	A decision note with retention, limit, and exclusions, or the escrow structure
Lender insurance conditions will clear	Certificates alone are informational. Additional insured and lender loss payee rights come from endorsements	The commitment-letter insurance section and a draft certificate pack

Sources for this table include McGuireWoods (above), Lippes Mathias on loss payee versus lender’s loss payee, and Peony on insurance due diligence.

what insurance deliverables do lenders usually require?

Liability: lender as certificate holder and additional insured, typically shown on an ACORD 25 certificate.
Property: lender as mortgagee and lender loss payee. Lender loss payee status protects the lender from some defenses the insurer could raise against the borrower. A plain loss payee does not.
Endorsements, not just certificates: a certificate of insurance is issued as a matter of information only and confers no rights on the holder. Additional insured, lender loss payee, and notice rights come from endorsements attached to the policy.
Notice: lenders usually want advance written notice before cancellation, non-renewal, or material change, often 30 days and 10 days for nonpayment of premium. Since 2009 the standard ACORD certificate says only that notice will be delivered under the policy provisions, so the notice right needs a policy endorsement. Source.
Key person life: some lenders require term life on a key person with a collateral assignment. Banks more often write it into the commitment letter. SBA loans can carry their own life insurance conditions under the current SBA operating procedures. Sponsor-backed private credit asks for it less often. Start the application at the letter of intent because medical underwriting takes time. Key person life is a life-insurance placement. Confirm that the person arranging it is licensed to place life insurance. Riza’s property and casualty agency license does not, by itself, mean Riza places life insurance. Source.

Your credit agreement controls. Counsel confirms.

what does an illustrative insurance memo look like?

Hypothetical illustration, not a client
Item	Illustrative finding	Deal treatment	Owner / date
Go-forward program	Current premium about $310k; go-forward range about $360k to $420k after adding cyber and employment practices and raising umbrella limits	Model updated; QoE adjustment discussed with the QoE provider	Sponsor and insurance agency, before investment committee
D&O tail	Seller’s claims-made D&O ends at closing; six-year tail needed	Seller-paid per the purchase agreement	Counsel, before signing
Collateral	High-deductible workers’ comp; seller letter of credit must be replaced	Replacement cost in sources and uses	Sponsor and lender, before closing
Open claims	Two open auto claims with reserves inside the deductible	Special indemnity or price	Counsel, before signing
Reps and warranties	Indications received; retention about 0.5% to 1.0% of enterprise value	Buyer-side policy; small retention escrow	Sponsor, week 2 of exclusivity
Board designees	Draft portco D&O has a broad capacity exclusion	Request affirmative outside-director wording	Insurance agency, before binding
Lender	Commitment letter requires additional insured, lender loss payee, and key person life on the CEO	Endorsements requested; life application started at the letter of intent with a life-licensed specialist	Sponsor and insurance agency, at closing

Figures above are illustrative only. Premium figures are hypothetical. The retention range is an illustrative shape: initial retentions commonly run about 0.5% to 1.0% of enterprise value, higher on deals of $25M and below, and some larger placements come in lower. Coverage is subject to underwriting and policy forms. Only a binder or policy creates coverage.

when should the insurance memo be produced?

Before the letter of intent: a one-paragraph insurance view in the teaser memo.
Exclusivity weeks 1 to 3: full insurance diligence runs beside QoE and legal, with indications if relevant.
Capital partner later stages: the eight-section memo goes into the investor data room with the QoE summary and capital structure.
Closing: the memo becomes the closing checklist for tails, binders, certificates, and endorsements.
Day 1 to 100: open items convert to the post-close plan and the first renewal calendar.

who wrote this guide?

Nick McClish, Managing Partner, Riza Risk

Nick McClish is Managing Partner of Riza Risk, a licensed insurance agency. He founded and sold Pluto Pet Insurance, and he was the first U.S. hire at ManyPets, where he led global growth and the U.S. launch as premium grew from $33M to $280M. He raised and led a search fund, founded Day One Growth, and holds an MBA from London Business School.

good to know.

Straight answers to what deal teams ask about insurance memo for capital partners.

What insurance questions do family offices ask independent sponsors before funding?

Mostly four: is the insurance cost in the model right, what transfers at closing, what has to be bought at closing, and whether their board designees and the investment vehicles are protected.

Should the capital partner run its own insurance diligence?

Usually the sponsor commissions it and shares the report, the same way a quality of earnings report is shared. A capital partner can ask for a call with whoever prepared it.

Is reps and warranties insurance enough for a capital partner?

No. It responds to breaches of the seller’s representations. It does not fix gaps in the operating program, open claims, or terminated policies.

Does a family office need its own D&O for a board seat?

First confirm the portfolio-company D&O covers designees in their director capacity. Some family offices also carry their own management liability. That is a separate review of their policy.

Who should prepare the memo?

The sponsor owns the memo and the model. A licensed insurance agency prepares the insurance findings. Counsel owns purchase-agreement and credit-agreement language.

see it in dollars before you sign.

Riza helps turn program facts into dollars a deal team can use. Placement, if any, is a separate step.

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