Reps & Warranties Insurance

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Unintentional or unknown breaches of Reps and Warranties (R&W) can be incurred during any point of a transaction from either the buyer or seller. Having proper protection against such potential financial loss is part of the due diligence with which we approach a potential deal. There are many positive aspects for dealmakers to obtain this coverage:

Clean Exit for Seller

Sale proceeds received by the seller can be retained by the seller with little or no escrows, indemnities or tail liabilities. This permits the seller to reinvest or distribute the sale proceeds to its investors faster.

Distinguishing Buyer’s Bid in Auction

R&W enables a buyer to enhance its bid by offering a reduced seller indemnity and escrow relating to breaches of the seller representations and warranties. This occurs on the basis that the R&W will provide the buyer additional recourse beyond that given by the sellers in the transaction documents.

Bridging the Gap Between the Buyer and Seller

When buyers and sellers in a deal have different expectations or requirements regarding the size, duration and scope of contractual indemnities, such disparity is often a heavily negotiated matter and can even cause the deal to collapse. R&W can effectively bridge this gap.

There may be concerns about the ability to enforce or collect on an indemnity against a financially distressed seller or geographically dispersed shareholders. Reps and Warranties insurance can insulate the seller from a discount to the selling price caused by concerns over the collectability of the seller indemnity after closing.

Unwilling to Pursue a Lawsuit Against the Seller

When a buyer retains certain principals of the seller, maintaining a good relationship with these employees is often critical to the success of the acquired business. This is also true when the selling entity is going to be an important customer of the buyer after the acquisition. R&W can be structured so that claims for breaches are made directly against the third-party insurer, not the seller or selling shareholders. This gives the buyer recourse for a breach when the buyer is unwilling to pursue its claim against the seller.


  • Structure: Buy-Side or Sell-Side Policies
  • Coverage: Amount typically tied to an escrow amount or can provide additional layers of protection. Amounts in excess of $100 million are available.
  • Cost: Approximately 2-5% of the limit of liability selected
  • Policy Period: Typically tracks with the survival period in the transaction agreement
  • Process: As quickly as 5-7 business days