NEW YORK—Risk managers should be included in their organization's merger and acquisition discussions far earlier than is usually the case, a group of experts said.

Issues such as the long-tail liabilities of a takeover target, inherited insurance programs and third-party insurance obligations should all be reviewed and discussed long before a deal is agreed on, they said during a presentation last week at Anderson Kill & Olick L.L.P.'s 13th annual Policyholder's Conference in New York.

Too often, however, corporate transition teams focus too much on the more glamorous aspects of a deal, such as pricing and integration of assets, and bring risk managers into the discussions only at the end of negotiations or after a deal is sealed, they said.

“As we've learned through experience, dealmakers often talk about liabilities in a vacuum, meaning it's often not easy for them to identify what the risks actually are and how insurance might come into play to cover them,” said Diana Shafter-Gliedman, a shareholder in Anderson Kill's insurance recovery and environmental law practices. “That's where your risk professionals become so crucial, because they can appreciate the risks of certain activities and how they might threaten, or at least significantly implicate, a potential merger or acquisition.”

Incorporating risk managers, brokers, forensic accountants and other liability experts at the onset of a proposed acquisition greatly increases the chances of identifying potential sources of liability, particularly if it involves business units or subsidiaries spread across a range of industries, the presenters said.

A company with a superficially low risk profile still could pose a significant liability risk to its purchaser if its assets include firms in high-risk industries such as energy, pharmaceuticals, technology and hospitality, said Robert Horkovich, also a shareholder in Anderson Kill's insurance recovery and environmental law practices.

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“The lag time on risks like asbestos exposure can be upwards of three to four years,” Mr. Horkovich said, adding that liabilities from an acquired company's subsidiaries can take years to emerge. “If you're buying a multifaceted company with a lot of tentacles reaching into different industries, you really need to understand the exposures that can open up.”

Equally valuable to the negotiations is a risk manager's ability to spot insurance program complications on both sides of the transaction.

Frequently, purchasing companies struggle to obtain a clear sense of an acquisition target's insurance assets, as well as the scope of claims made against them, Mr. Horkovich said.

“They may have a piece of paper that says you've got coverage (after the purchase is completed), but really all you've got is a license to litigate,” he said.

Risk managers also will likely be able to identify risk transfer mechanisms that could have serious implications for the true value of an acquisition target's insurance program, including retroactive premiums, fronting arrangements and high-deductible policies.

Another common sticking point in many negotiations, Ms. Shafter-Gliedman said, is the degree to which individuals and entities associated with an acquisition target can access insurance held by the purchasing firm, and vice versa.

In particular, issues over coverage for additional insureds easily can delay or derail a proposed purchase or merger. Some insurance policies spell out specifically which entities are covered, but many do not, leaving open the possibility that any of the acquisition target's executives, subsidiaries or third-party relationships could access the purchaser's coverage, Ms. Shafter-Gliedman said.

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Conversely, risk managers could discover that the acquisition target itself is named as an additional insured in a third-party's coverage program, thus providing the purchasing company with an added layer of insurance.

“The issue of additional insured coverage can either be a lottery ticket or a land mine,” Ms. Shafter-Gliedman said. “Either way, you've got to know what's out there.”

Even if companies are only in the theoretical stages of planning a merger or acquisition, risk managers still should be included in the conversation, said audience member Lori Seidenberg, senior vice president of enterprise risk management at the New York-based Centerline Capital Group.

“Your risk manager may be working on your renewal, and the renewal application usually has specific questions about whether or not mergers and acquisitions are going to occur,” Ms. Seidenberg said.

“Even if you're just contemplating a merger, you have to understand that not all risk managers have a seat at the table, and they may not be a part of discussions that are happening at the C-level,” she said.