Rep & Warranty Insurance
R&W Overview
M&A experts worldwide are using an insurance policy known as a Representation and Warranty (R&W) to transfer risk from the parties in a transaction to an insurance company. R&W policies are designed to, “step in the shoes” of a seller to pay indemnification claims made by the buyer for inaccuracies of the representations and warranties outlined in the purchase/sale agreement.
Due to the low cost of R&W insurance, sellers are driving the demand for these policies rather than accept large, lengthy escrow or withhold terms. Buyers are discovering how R&W insurance can enhance their bid without having to raise their offer.
Sell-Side Rep & Warranty (TLPE)
- An R&W policy replaces the indemnification provision and reduces the escrow to 1% or less of the purchase amount.
- Enables early and final distribution of proceeds to investors.
- Locks in the return and provides a clean exit as contingent liabilities are covered.
- Expedites the sale by getting the Indemnification issue “off the table”.
For The Buyer
- Distinguishes bid in a competitive auction, without raising the offer price.
- Eases concerns about collecting on seller’s indemnification.
- Preserves relationship with seller. In the event the seller is remaining with the company, the buyer pursues the R&W insurer, and NOT the seller in the event of a breach.
- Expedites the sale by getting the Indemnification issue “off the table”.
Rep & Warranty By The Numbers
TLPE Application Form
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