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Representation & Warranty Insurance

Representation and warranty insurance protects buyers against financial losses (including defense costs) from breaches of a seller’s representations and warranties. The policy language and the coverage provided are custom to each acquisition and negotiated on a deal-by-deal basis, and can be adapted to cover a wide range of risks. R&W reduces or eliminates the seller’s escrow and offers the buyer additional protection and a longer survival period than what might otherwise be available.

BUYERS

Risk Management Uses

Provide recourse when no or limited seller indemnity is available
Ease collection concerns
Increase maximum indemnity and extend survival periods
Satisfy lenders’ requirements for additional security on transaction

Strategic Uses

Enhance bid in auction process
Protect key relationships with executives (e.g., avoid post-closing claims against managers)

SELLERS

Risk Management Uses

Free up sale proceeds for immediate distribution (reduce or eliminate escrow or holdback)
Reduce or eliminate post-closing contingent liabilities
Protect passive sellers