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Reps & Warranties Insurance

Mergers and acquisitions are on the rise; however, so is post-acquisition litigation. Companies involved in this venture face a multitude of backlash if the deal goes awry. This policy protects companies against the growing risk of costly litigation after a merger or acquisition.

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Who is Representations & Warranties Insurance for?

Representations & Warranties (R&W) is an insurance policy relating to corporation transactions, such as mergers and acquisitions. R&W insurance protects buyers and sellers, covering the indemnification of specific breaches of representations and warranties in the transaction agreement.

Buyers

An R&W policy can make buyers’ bids seem more attractive, extend the time for duration, enhance the amount of protection, and improve the buyer’s likelihood of winning a case under this coverage.

Sellers

R&W insurance can improve the condition of the deal, provide a cleaner exit, reduce or eliminate the traditional seller’s indemnity for breach of contract, and offer more extensive coverage without many qualifiers.

Both parties

Using an R&W insurance policy helps to simplify and speed up negotiation of the acquisition agreement. Plus, it offers more coverage than traditional acquisition agreements offer.

Why you need Representation & Warranties Insurance

Summary

Mergers and acquisitions (M&As) are on the rise. Each year, more and more companies join forces to form healthier and more sustainable organizations. Although this business strategy is desirable and successful, it also comes with a hefty amount of risk. Consider what would happen if a seller’s representation were inaccurate, causing a buyer financial loss. Or if the buyer filed a lawsuit against the seller, alleging a breach in the terms of agreement.

Representations and warranties (R&W) insurance benefits buyers and sellers, protecting both parties from costly litigation by providing capital for legal fees and settlements. Additionally, this policy services as an excellent negotiating tool, often ensuring more lenient indemnification terms or removing them entirely.

Reasons for getting Representations & Warranties Insurance
file copyright tm Safeguards the purchase or sale or a company
shield check Transfers M&A fears and risks from your company to the insurer
legal Covers the indemnification of specific breaches
Known value of M&A deals since 2000
$57t

Companies have announced more than 790,000 transactions since 2000. The known value of these transactions is well over $57 trillion, confirming that M&A activity isn’t going to slow down anytime soon.

Executives interested in alternative M&A
42%

Given the economic and political uncertainty, 42% US corporate executives are interested in exploring nontraditional M&A in the near future. What this means is R&W insurance will act as more of a safety net than ever before as we map uncharted waters.

Rise in post-pandemic M&As
60%

When COVID-19 was declared a pandemic, the M&A activities came to a screeching halt. However, with the pandemic nearing its end, over 60% of businesses are more interested now in M&As than they were pre-pandemic.

What Does Representation & Warranties Insurance Cover

You will have to consult your policy documents to confirm exactly what is and what isn’t covered by Representations & Warranties insurance but here are a few scenarios that typically would be covered:

Breaches of purchase agreement

R&W insurance is generally meant to cover breaches of all general and fundamental representations and warranties within a purchase agreement.

Pre-closing tax indemnities

Pre-closing tax indemnities are generally covered but only to the extent where the seller’s financials are incorrectly calculated.

Seller fraud

A typical buy-side policy does provide the buyer with the benefit of coverage for seller fraud.

Representation & Warranties Insurance Claim Examples

Here are some claim examples that illustrate what Representation & Warranties Insurance covers

If a buyer discovers that a sellers’ representations were inaccurate, and the buyer suffers a financial loss, a massive lawsuit typically ensues.

Representation & Warranties Insurance FAQs

The cost of R&W insurance depends on your company’s unique needs and the details of your upcoming M&A deal. Working with a seasoned insurance professional is the best way to ensure you get the coverage you need.

How it works

Finding insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined & intuitive as possible.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

1
Get a quote

Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

2
Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

3
Stay one step ahead

To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.

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