Specialty Risk Managment
Transactional Risk Management – Mergers & Acquisitions: Representations and Warranties Insurance
Representations and warranties insurance is a specialized form of business insurance that covers specific losses that can occur during M&A. Contractual terms are set during mergers and acquisitions in which the seller indemnifies the buyer for breaches in representations and warranties.
With R&W insurance, the insurer pays a lower premium (typically 2%-3%) and underwriting/broker fees for a third-party insurer covering losses up to ~10% of the M&A price. Like any insurance plan, there are deductibles, limitations, and exclusions of coverage. While both the buyer and seller can use this business insurance, most insureds are the buyers.