Representations and Warranties Insurance

Representations and warranties (R&W) insurance is a type of transactional risk insurance designed to facilitate mergers and acquisitions. During a merger or acquisition negotiation, the seller makes representations and warranties to the buyer regarding key facts of the seller's business.

R&W insurance is designed to provide protection to either the buyer or seller of the business in connection with inaccurate representations or warranties made by the seller. If the buyer of the business purchases R&W insurance, then the policy will provide coverage to the buyer for financial losses caused by the seller's inaccurate facts. The insurance company will compensate the buyer directly so that the buyer does not have to pursue a lawsuit against the seller. If the seller of the business purchases R&W insurance, then the policy will provide coverage to the seller for defense costs and losses incurred in connection with the buyer's lawsuit.

Some of the risks that can be covered by R&W insurance include the following:

• Inaccurate financial statements
• Inaccurate tax returns and tax liabilities
• Inaccurate diclosure of asset or equity ownership
• Inaccurate description or funding of employee benefits
• Non compliance with laws and regulations
• Incorrect ownership or infringement of intellectual property

There are many advantages for both the buyer and seller to purchasing R&W insurance, including:

• Reduces seller's contingent liabilities
• Protects passive sellers against liability
• Expedites mergers or acquisitions
• Protects buyer against having to claim and collect damages from seller

Give us a call to discuss your representations and warranties insurance needs.