In an ever changing mergers and acquisitions landscape, Representations and Warranties insurance has become a strategic option that can help clients mitigate risk and successfully buy and sell businesses. While merger and acquisition activity has generally slowed since the high points that it reached in 2006 and 2007, the use of Reps and Warranties insurance has grown significantly with brokers and underwriters reporting that submissions for such insurance have been on the rise. Over the past 15 years, Reps and Warranties insurance has evolved to become a useful tool for getting deals done, and as deal practitioners have recognized this evolution, use of the product, has become increasingly popular.
Introduction
In general terms, a Reps and Warranties insurance policy protects the insured in the event that there is a breach of the representations and warranties provided by a seller in the acquisition agreement. Customarily, sellers are obligated to indemnify buyers for material breaches of representations and warranties. Reps and Warranties insurance steps into the shoes of the seller to make the buyer whole in the event of such a breach.
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