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
Strategic Uses
- Attract best offers by maximizing indemnification protecting buyers
- Set bidders’ expectations regarding seller’s post-closing indemnity obligations
Practice Leader
Representation & Warranty Insurance Team
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