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PI Risks in private equity portfolios

February 12, 2026

PI claims can drain resources and derail exits. Our PII expertise protects PE portfolio value through due diligence and tailored coverage.

Professional indemnity insurance (PII) is key for private equity (PE) portfolio companies due to the unique risks they face, especially in high-stakes, regulated, and fast-evolving environments. Here's a breakdown of why it's important and the challenges involved:

Why Professional Indemnity matters to PE portfolio companies?

Private equity firms aim to maximise the value of their investments. A legal claim against a portfolio company could:

  • Drain financial resources
  • Damage reputation
  • Delay or derail exit strategies (e.g., Initial Public Offerings (IPOs) or acquisitions)

Professional Indemnity Insurance (PII) is designed to provide protection against firms in the event of a claim being made against them for failure to provide and/or negligence in providing a professional service. Portfolio Companies vary in activity and sector, and it is vital that the policy wording is tailored to meet the specific needs of the entity. By engaging with a specialist Broker, the PE house will make sure that the needs of each of its investments are met and that the correct coverage is provided. Willis has specialist contract advisory teams whose role is to design bespoke policy wordings to meet individual client needs. We have recently developed an excess cover solution, ProXS offers law firms, professional services, and construction consultants flexible excess PI insurance up to *CCY40M (contractors and developers up to *CCY25M) above an initial *CCY10M capacity. See our ProXS product.

Case Study: Streamlining a Complex Insurance Programme for a Growing Financial Services Firm

A rapidly expanding multidisciplinary financial services firm, regulated across several professional bodies, had accumulated a fragmented insurance programme over time. The firm held eight separate policies, each placed with different insurers and brokers, all renewing on different dates.

This structure created administrative burden, inefficiency, and limited the firm’s ability to leverage its full risk profile for better terms.

We conducted a full review of the firm’s existing insurance arrangements, identifying overlaps, gaps, and opportunities for consolidation. Working closely with the firm’s leadership, we designed a streamlined programme that aligned coverage needs across all business units while simplifying management and improving insurer engagement.
  • Mapping all existing policies, terms, and renewal cycles
  • Assessing coverage requirements across the firm’s regulated activities
  • Consolidating policies into a unified structure
  • Negotiating with insurers to secure improved terms under a single coordinated programme.
The firm now benefits from a significantly simplified and more efficient insurance structure:
  • One consolidated policy reflecting all required coverage
  • A single common renewal date, reducing administrative complexity
  • 20% premium savings, achieved through consolidation and improved insurer negotiation leverage

Impact of PI claims on investments

PI claims can impact investments in various ways at all stages of the investment lifecycle, whether pre-acquisition, during the hold period or at the point of exit:

Pre-acquisition

After identifying a target, if the professional risks are not appropriately assessed during due diligence, vulnerabilities may not be identified, and the deal value can be overestimated. Willis has seen PI claims during a transaction process and, in such instances been able to quantify the potential exposure from a valuation perspective.

PI policies are written on a claims‑made basis, so it’s important to establish where the acquired target’s liabilities will sit for any acts committed prior to completion of the purchase. Willis supports acquiring firms by providing policy reviews and audits to ensure there are no gaps or ambiguities in coverage in relation to the SPA and the change of ownership.

During the hold period

The costs of a PI claim can be considerable; including legal fees, compensation of damages, fines and penalties. A PI claim can have long‑lasting consequences, including reputational damage. This reputational damage could go further than one portfolio company and could affect the private equity firm by impacting investor confidence at the fund level and even future fundraising.

Claims can take a long time to resolve, senior management may become distracted and inward‑facing, which may lead to missed opportunities and potential loss of revenue.

Upon portfolio exit

A robust and mature risk management approach within a company can mean it is perceived as more resilient and capable of long-term growth, which can increase market value at the time of exit. Conversely, portfolio companies with inadequate risk management measures are less attractive to potential buyers and often seen as higher risk; this may result in fewer interested bidders and a greater challenge in obtaining the maximum valuation.

Summary and recommendations for PE firms

  1. 01

    Perform robust due diligence

    Comprehensive risk assessments of target companies to understand their maturity will assist with negotiations and avoid deal delays.

  2. 02

    Implement effective risk management strategies

    Addressing the unique PI risk exposures at each portfolio company is crucial to protect and maximise the investment value. However, viewing the portfolio holistically rather than as individual investments can deliver benefits such as:

    • best practices and lessons learned can be applied across the portfolio

  3. 03

    Demonstrate continuous monitoring

    PE firms remain exposed during the hold period; ensure you respond to any new PI risk management threats or regulations.

    At Willis, we understand Private Equity and Professional Risks. By integrating Willis’ expertise in the Private Equity practice – spanning professional indemnity due diligence, portfolio management and tailored insurance solutions - PE firms can mitigate risks, maximise exit valuations and protect investor confidence. Please contact us to find out more.

Why Willis, a WTW Company

Willis has dedicated specialists for sectors like:

  • Construction and engineering
  • Financial services
  • Healthcare
  • Legal and consulting
  • Technology

This will make sure your PII policy is precisely tailored to the unique risks your portfolio company faces, reducing exposure and enhancing coverage. 

In the event of a claim, Willis has in-house claims advocate teams with deep industry knowledge, who can provide efficient handling and support during the negotiation and settlement of the claim.

Contacts

Duncan Philpott
Executive Director, Professional Indemnity
Email+44 20 3193 9409
Sarah Khan
Director, Professional Indemnity Insurance, FINEX GB
Email+44 203 1247373
Jade Scorer, Director FINEX PI
Jade Scorer
Director FINEX PI
Email+44 20 3124 8402
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