Representations and Warranties
Representation and warranty insurance (R&W) is a form of insurance purchased in relation to a corporate transaction, merger or acquisition to indemnify the parties for specified breaches of the representations and warranties associated in the agreement.
R&W insurance has become increasingly popular among businesses and M&A teams as a way to shift-risk, protect investments, save capital in the often uncertain landscape of corporate transactions, and avoid litigation between the parties to the transaction over the question of whether one party breached representations and warranties or not. Although R&W insurance can be both “buyer side” and “seller side,” these policies have particular benefits to, for example, buyers in a seller’s market by reducing the seller’s escrow while still protecting the buyer’s investment.