Representations & Warranties Insurance
Representations & Warranties Insurance
In an increasingly aggressive M&A landscape, Representations & Warranties Insurance provides private equity fund managers, strategic and corporate buyers, risk managers and other stakeholders with a risk mitigation solution for uncertainties surrounding mergers and acquisitions. Available to either party, R&W policies provide protection against financial loss, including defense costs for certain unintentional and unknown seller breaches in the context of an acquisition or merger agreement.
Why Use Representations & Warranties Insurance?
- Provides a secure and clean exit for both parties
- Reduces Seller’s indemnification obligation to Buyer
- Minimizes post-closing liabilities
- Allows for greater flexibility in negotiating deal terms
Buyer’s Benefits
- Enhances bid in auction process
- Supplements / Replaces Seller’s indemnity
- Increase indemnification afforded by the purchase agreement
- Allow for smooth transition with target management team
- Mitigate post-close Seller solvency concerns
Seller’s Benefits
- Secures clean exit by reducing or replacing indemnification obligations to Buyer
- Expedited sale process
- Maximizes proceeds realized at deal close
Fully Customizable Transaction Solutions for Either Party in an M&A Transaction
CAPACITY – With over 20 carriers and managing general underwriters providing capacity in the US, solution exists
for deals of all sizes based on purchase price.
BUY & SELL SIDE PROGRAMS – While vast majority of policies are Buy-Side, either party can be insured and benefit from coverage.
COMPETITIVE TERMS & CONDITIONS
- LIMIT STRUCTURE – typically 10% of TEV in underlying transaction
- PREMIUM – typically ranges between 2.5% – 4% of limits purchased
- SELF-INSURED RETENTION – SIR is set as an aggregate amount for the policy term and is approximately 1% of TEV with reduction features at 12/18 months post deal closing
- POLICY TERM – 3 Years for General R&W and 6 Years for Fundamental R&W
- EXPEDITED UNDERWRITING PROCESS – Non-binding pricing indications can be procured within a matter of days, with complete underwriting process generally completed in under a week
Your IMA Contact
DANIEL POSNICK
Transactional Liability Leader
daniel.posnick@imacorp.com