Representation and Warranties insurance was first introduced to the marketplace around 1998. Since that time, now closing in on two decades, the use of Rep and Warranties insurance has grown considerably, particularly over the last three years. While initially some may have viewed such transactional insurance as a novelty, these products are now routinely considered by deal practitioners as a strategic option to mitigate risks in connection with the purchase and sale of businesses.
We first discussed the emergence of Rep and Warranties insurance as a deal-making tool in our September 2012 column.1 Over the last few years, however, Rep and Warranties insurance has become an increasingly important option as funds, banks and their counsel have grown more comfortable with these products. For example, AIG, one of the leading insurers in the market, reports that in 2015, AIG reviewed eight times more submissions for Rep and Warranties insurance as compared to 2012 and bound five times more policies than the number bound in 2012. This dramatic increase is consistent with anecdotal evidence reported by deal practitioners.
R&W Insurance 101
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