Representations and Warranties Insurance:
A Legal Guide for M&A Deal Teams

What RWI Is and Why It Emerged

Representations and warranties insurance is a specialty insurance product that can cover financial losses arising from breaches of the seller's representations and warranties in a purchase agreement. Under a buy-side policy, the buyer can make a claim directly against the insurer rather than pursuing the seller through the purchase agreement's indemnification provisions, subject to the policy terms. The insurer may assume part of the role that an indemnification escrow or seller-funded survival obligation would otherwise play.

RWI developed as a way to transfer specified breach risk to an insurer when the parties want greater post-closing recourse, deal finality, or both. Expanded insurer participation and underwriting capacity have made the product relevant across a broader range of private M&A transactions, but availability and terms remain transaction-specific.

The structural issue RWI addresses is the tension between the buyer's need for post-closing recourse and the seller's desire for deal finality. Without RWI, the buyer may rely on an escrow or a surviving seller indemnification obligation. With RWI, the parties can negotiate whether the insurer replaces or supplements those remedies, who bears the retention and premium, and which excluded matters remain with the buyer or seller.

Understanding how RWI fits into the broader suite of M&A transaction services is the starting point for any deal team evaluating whether to incorporate it. The product interacts with indemnification provisions in the purchase agreement at every level, from basket mechanics to survival periods to the scope of covered losses, and counsel experienced in coordinating RWI placement with SPA negotiation is essential to ensuring that the policy and the agreement work together as intended.

Buy-Side vs. Sell-Side Policies

The fundamental distinction in RWI structure is between buy-side and sell-side policies, which differ in who is the insured, how claims are made, and what role the seller plays in the coverage structure. Buy-side policies name the buyer as the insured. When a potential covered breach is discovered, the buyer submits its claim directly to the insurer. The policy may preserve the insurer's subrogation rights against a seller for seller fraud. Separately, the purchase agreement determines which direct buyer claims and seller liabilities survive closing.

Sell-side policies reverse the structure. The seller is the insured, and the policy pays the seller if the seller is required to indemnify the buyer for a covered breach. The buyer's contractual claim is against the seller under the purchase agreement in the normal course, and the seller's policy responds to fund the indemnification payment. Sell-side policies were more common in the product's early years because they resembled the traditional insurance model more closely and were more intuitive for sellers unfamiliar with the product. They remain available and are used in certain circumstances, including transactions where the buyer's counsel prefers to retain a direct contractual claim against the seller rather than relying on an insurer as the primary counterparty for breach recovery.

Buy-side policies give buyers direct access to the insurer without depending on the seller to administer the insurance claim. They can also support a seller-favorable bid when the buyer offers limited surviving seller liability backed by insurance. Whether that structure is appropriate depends on the auction dynamics, policy exclusions, retention, and the seller liabilities preserved in the purchase agreement.

Under a buy-side policy, the seller still makes representations and the insurer underwrites those representations. The purchase agreement may preserve direct seller liability for fraud or specified matters, while the insurer's subrogation rights depend on the policy. These are separate sources of potential seller exposure and should be reviewed together.

When RWI Makes Sense: Deal Size, Market Posture, and Transaction Profile

RWI is not appropriate for every transaction, and deal teams should assess when the product adds value relative to its cost and limitations. Relevant factors include transaction value, the available policy limit and premium, the competitive context, the seller's financial capacity to fund indemnification claims, and the complexity of the representations being made.

There is no reliable fixed transaction-size threshold for RWI. Minimum premiums, insurer appetite, available limits, retention, exclusions, and diligence requirements vary by transaction and market conditions. Deal teams should request current indications and compare the complete policy proposal with the economic and legal consequences of the alternative seller indemnification structure.

The competitive context of the transaction matters independently of deal size. In an organized auction process with multiple bidders, offering to accept a nominal seller survival cap backed by a buy-side policy is a differentiating factor that can be as valuable as a modest price improvement. Sellers and their advisors understand that a buyer offering clean economics and limited post-closing exposure is presenting a lower total cost and complexity of exit than a buyer offering a higher headline price but requiring a substantial escrow holdback. For proprietary or bilateral transactions where there is no competitive pressure, the calculus is different: the buyer and seller can negotiate escrow and survival terms directly without the constraint of auction market expectations, and RWI becomes a question of whether the buyer prefers an insurer as its breach counterparty over the seller.

Transaction profile also affects the value and availability of RWI. Deals with complex representations across multiple jurisdictions, significant intellectual property, or environmental exposure may require more focused underwriting and exclusions than simpler business profiles. The deal structure itself also affects which representations are made and what diligence the insurer expects.

How RWI Changes Deal Negotiation: Public-Style Deals in the Private Market

RWI can reduce or replace survival-period and indemnification escrow obligations that otherwise allocate post-closing breach risk to the seller. The parties still must negotiate the survival period, basket or deductible, cap, excluded matters, and claim procedures. RWI changes those negotiations by adding the policy's retention, coverage grant, exclusions, limit, and claims requirements to the risk-allocation structure.

With a buy-side policy in place, the seller's remaining exposure depends on the purchase agreement, policy, and underwriting. It may include fraud, specified retained liabilities, excluded risks, or other negotiated indemnification obligations. The survival period, basket, cap, and claim provisions in the purchase agreement should be compared with the policy's retention, coverage grant, exclusions, and procedures to identify gaps before closing.

RWI can allow a private-company transaction to use a public-style indemnification structure in which the seller's representations do not create broad post-closing liability and the insurer provides specified breach coverage. The purchase agreement must still preserve any seller responsibilities that the parties intend to survive closing, and the policy must be checked for exclusions and conditions that could leave a gap.

The practical effect on the working capital adjustment at closing is worth noting separately. Working capital adjustments are pricing mechanisms rather than breach-of-representation claims and may fall outside RWI coverage. The purchase agreement should maintain working capital adjustment mechanics independently, and the deal team should confirm the actual policy language.

RWI Policy Structure Overview

An RWI policy is a contract between the insured party and the insurer that defines covered losses, excluded matters, the retention amount, the policy limit, the coverage period, and the procedural requirements for making a claim. Understanding the structure of the policy at a conceptual level before engaging in the underwriting process allows deal teams to make informed decisions about which insurer to approach, what terms to negotiate, and how the policy interacts with the purchase agreement.

The coverage grant in an RWI policy defines what the insurer will pay for: losses, including damages, costs, and in some policies defense costs, arising from a breach of a representation or warranty in the purchase agreement. The definition of "breach" and "loss" are critical drafting points. Some policies define breach by reference to the purchase agreement's indemnification provisions, incorporating any baskets, caps, and qualifiers from the agreement into the policy's coverage. Others define breach independently, which can create differences between what is a covered breach under the policy and what triggers an indemnification obligation under the purchase agreement. Coordinating these definitions is one of the most important functions of counsel experienced in RWI placement.

The policy's exclusion schedule identifies matters that the insurer will not cover. Proposed exclusions may reflect both recurring insurer concerns and deal-specific risks identified in the underwriting review. The exclusion schedule should be reviewed in detail before binding because the buyer may be able to narrow an exclusion by providing additional diligence or negotiating more precise language.

The coverage period defines how long after closing the buyer can make a claim. The period may differ by representation category and may not match the survival periods negotiated in the purchase agreement. Buyers should compare the actual periods in both documents so a timely contractual claim does not fall outside the policy's coverage period.

Underwriting Process and Exclusions

The RWI underwriting process is the mechanism by which an insurer evaluates the transaction, assesses the scope of representations being made, reviews the diligence record, and determines what it will and will not cover. The process typically begins with a non-binding indication, in which the buyer or its broker provides a summary of the transaction and the insurer indicates whether it is willing to provide coverage and at what general rate and retention. The buyer then selects an insurer and proceeds to the binding underwriting phase, which involves submission of the draft purchase agreement, disclosure schedules, a diligence summary or report, and any other materials the insurer requires to evaluate the representations.

The binding underwriting process may include a call in which the insurer's underwriting team reviews the representations with the buyer's deal team and counsel. The purpose is to identify known issues, areas where diligence was limited, and matters the insurer may address in the exclusion schedule. Buyers should prepare by reviewing the disclosure schedules and the diligence conclusions for each material representation category.

For a detailed analysis of the underwriting process and how exclusions are structured and negotiated, see the companion resource on RWI underwriting process and exclusions. That resource covers the submission package requirements, underwriting call preparation, categories of standard exclusions, negotiation strategies for narrowing exclusions, and the interaction between the disclosure schedules and the exclusion schedule in the final bound policy.

One point that deal teams frequently underestimate is the impact of diligence quality on the scope of exclusions. Underwriters review the diligence record to assess whether the buyer's counsel has adequately investigated the areas covered by the representations. If diligence on a specific representation category was limited, the underwriter may exclude that category entirely or apply a broader exclusion than would apply to a fully investigated matter. Buyers who conduct thorough, well-documented diligence with experienced counsel create a stronger basis for negotiating narrower exclusions, which translates directly into broader effective coverage.

Policy Terms, Retention, and Caps

The economic terms of an RWI policy, specifically the retention, aggregate policy limit, and coverage period, define the practical scope of the buyer's insurance protection and must be coordinated with the purchase agreement's indemnification provisions. Each term should be evaluated against the transaction's risk profile and the insurer's current proposal.

The retention is the amount of covered loss the insured must absorb before the insurer begins paying. Its amount and mechanics are negotiated for the transaction. Deal teams should confirm when covered losses count toward the retention, whether different retentions apply to different risks, and how the retention interacts with any seller-funded layer. For more detail, see the companion resource on RWI policy terms, retention, and caps.

The aggregate policy limit defines the maximum amount the insurer will pay across all claims under the policy. The parties should select a limit based on the risks being transferred, the remaining seller recourse, the policy exclusions, and the cost of coverage. If the desired limit exceeds one insurer's capacity, the buyer may explore excess layers and compare their terms with the primary policy.

The coverage period may vary by representation category and insurer. Buyers should map each policy period against the corresponding purchase agreement survival period and applicable claim procedures to identify gaps before binding.

Claims Process and Recovery

The value of an RWI policy is ultimately demonstrated through the claims process. A policy that provides broad coverage on paper but is administered in a way that creates friction, delay, or disputes over coverage provides less practical protection than a policy with slightly narrower terms but a smooth and responsive claims handling process. Understanding the claims process before selecting an insurer, and structuring the policy's procedural requirements carefully, are both important steps in obtaining genuine protection.

Claims under an RWI policy begin with a written notice to the insurer upon discovery of a potential breach. The policy specifies the form of notice, the information required, and the timeframe within which notice must be given after discovery. Late notice or failure to provide required information can give the insurer a basis to contest coverage, so buyers should establish an internal protocol for identifying and reporting potential claims before any issue reaches the magnitude of a formal claim. Counsel should review the notice provisions before the policy is bound and confirm that the buyer's post-closing integration team understands the reporting obligations.

For a detailed treatment of the claims process, documentation requirements, insurer response obligations, coverage disputes, and strategies for maximizing recovery, see the companion resource on RWI claims process and recovery. That resource covers the investigation phase, the insurer's rights to participate in breach remediation, subrogation against the seller in fraud cases, and the procedural mechanics of bringing a claim to resolution. It also addresses coverage disputes and the role of coverage counsel in contested claims situations, which is a distinct specialty from the transactional counsel who placed the policy.

One aspect of the claims process that buyers sometimes find counterintuitive is the insurer's right to control the defense or remediation of a covered breach in certain circumstances. Some policies give the insurer the right to participate in or control litigation against third parties in connection with a covered breach, and some policies require the buyer to cooperate with the insurer's investigation and obtain the insurer's consent before settling a third-party claim that might give rise to a covered RWI loss. Buyers should understand these cooperation and consent provisions before binding the policy, because they can affect how the buyer manages post-closing disputes and integration-period issues that have potential insurance implications. The indemnification claims process more broadly, including the mechanics of breach notice, quantification, and dispute resolution under the purchase agreement, provides essential context for understanding how RWI fits into the post-closing recovery framework.

Premium and Retention Economics

The economics of RWI coverage involve three interconnected variables: the premium rate applied to the policy limit, the retention amount, and the allocation of premium cost between buyer and seller. Understanding how these variables interact allows deal teams to structure the insurance component of the transaction in a way that maximizes protection at a cost that is proportionate to the transaction economics.

Premium rates are quoted against the policy limit and vary based on the transaction's industry, the complexity of the representations, the quality of diligence, the insurer's claims experience, and current market conditions. Buyers should obtain current indications and compare the full proposed terms rather than rely on prior-deal pricing.

The total cost of an RWI policy may include the base premium, broker compensation, applicable surplus lines taxes, and an underwriting fee. Deal teams should identify every component before selecting an insurer and compare proposals on a consistent total-cost and coverage basis.

The purchase agreement may allocate the RWI premium to the buyer, the seller, or both as part of the transaction economics. The parties should negotiate that allocation together with the escrow, retention, exclusions, and residual seller liability instead of treating the premium as an isolated cost.

Interaction with Indemnification Escrow

The relationship between RWI coverage and the traditional indemnification escrow structure is the most consequential practical question in structuring a transaction with insurance. The historical indemnification escrow served as the seller's funded commitment to stand behind its representations: if a breach was discovered, the buyer could draw on the escrow without needing to pursue the seller directly for payment. RWI can replace some or all of that function, but the mechanics of how the two structures interact require careful coordination between the purchase agreement and the policy.

When RWI replaces the traditional escrow structure, the purchase agreement may limit seller survival obligations and direct the buyer to the insurer for covered breaches above the retention. The parties must still decide who bears the retention, excluded matters, fraud risk, and any specified seller liabilities.

Some transactions pair a reduced escrow with RWI and use the escrow to fund the retention or other negotiated seller responsibilities. This hybrid structure can reduce the seller's funded exposure while preserving a source of recovery for risks that the parties do not transfer entirely to the insurer. The agreement and policy should state how losses are allocated across those layers.

The interaction between the RWI structure and indemnification provisions in the purchase agreement extends beyond the escrow question to the definition of indemnifiable losses, the scope of the seller's surviving representations, the procedure for making indemnification claims, and the resolution mechanism for disputed claims. Each of these provisions in the purchase agreement should be reviewed against the corresponding policy provisions to ensure consistency. Inconsistencies between the agreement and the policy can create gaps where a buyer believes it has coverage but neither the purchase agreement's indemnification provisions nor the policy actually provide a remedy.

Carve-Outs and Exclusions from Coverage

Understanding what RWI does not cover is as important as understanding what it does cover. The exclusion schedule in a bound policy is a negotiated, transaction-specific document. Buyers should review how each proposed exclusion applies to the risks they want to transfer and should not treat the schedule as boilerplate.

Policies may exclude forward-looking representations, purchase price adjustments, known matters, and risks disclosed in the disclosure schedules. The precise language controls, and the treatment of a particular matter can depend on the policy, diligence, and underwriting record.

Additional proposed exclusions may address environmental remediation, pension and ERISA liability, healthcare regulatory compliance, or secondary tax liability. Buyers with exposure in these areas should discuss the proposed language with the broker and insurer and determine whether narrower wording or a separate specialty insurance product is available.

Deal-specific exclusions can arise from matters identified during underwriting. If diligence reveals a disclosed regulatory inquiry, the underwriter may propose an exclusion, narrower coverage, or additional information requirements. The final treatment depends on the facts, diligence, insurer, underwriting process, and negotiated policy language. Additional documentation or expert analysis may help the buyer request narrower wording, but the insurer may retain the proposed limitation.

Tax Insurance as a Related Product

Tax insurance is a distinct specialty insurance product that covers the risk that a specific tax position taken by a company will be successfully challenged by a taxing authority, resulting in additional tax liability, interest, and penalties. In the M&A context, tax insurance is frequently used alongside RWI to address specific tax exposures that are identified during due diligence but that the RWI underwriter excludes from the representations and warranties policy's coverage. The two products serve complementary functions: RWI covers the broad range of representations made in the purchase agreement, while tax insurance covers a discrete identified tax risk at a specific probability threshold.

Tax insurance applications in M&A transactions can include uncertain positions related to intercompany transfer pricing, prior acquisitions or dispositions, restructurings, or worker classification. The insurer evaluates the identified facts and legal support for the position and decides whether to offer coverage, at what limit, and subject to which exclusions.

Tax insurance pricing depends on the insured exposure and the underwriter's assessment. Deal teams can compare a policy proposal with alternatives such as an escrow, specific indemnity, or purchase price adjustment for the identified tax risk.

Contingent Liability Insurance

Contingent liability insurance covers known but contingent liabilities that a buyer is acquiring alongside the target business. Unlike RWI, which addresses unknown breaches of representations discovered post-closing, contingent liability insurance addresses identified risks with uncertain outcomes. The product is used when a known exposure, such as pending litigation, a regulatory investigation, product liability claims, environmental remediation obligations, or employee benefit plan liabilities, is large enough to affect deal pricing or structure but the buyer and seller prefer to transfer the risk to an insurer rather than negotiate a price reduction or indemnification reserve.

The underwriting process for contingent liability insurance is substantive and typically requires the buyer and seller to provide detailed documentation of the underlying liability, including litigation records, regulatory correspondence, expert assessments, and legal analysis of the exposure. The insurer engages its own counsel and experts to evaluate the risk independently before quoting. Coverage is available only when the insurer can form a view of the probability and magnitude of the liability with sufficient confidence to price it actuarially. Contingent liabilities that are too early in their development, where the facts are unclear and the outcome is genuinely unpredictable, are generally not insurable at a commercially reasonable rate.

Potential uses for contingent liability insurance include transferring an identified litigation or regulatory exposure, replacing or reducing a negotiated indemnification reserve, or obtaining coverage before signing for a known risk that affects transaction structure. Availability depends on whether the insurer can evaluate and price the specific exposure.

Litigation Buyout Insurance

Litigation buyout insurance, sometimes called litigation risk insurance or single-risk litigation insurance, covers the risk of an adverse judgment, settlement, or enforcement outcome in a specific identified piece of litigation. The product transfers the financial risk of a defined legal proceeding from the insured to the insurer, allowing the insured to remove a litigation liability from its balance sheet, facilitate a transaction that would otherwise be delayed or structured around the litigation, or achieve certainty of loss exposure in connection with settlement negotiations.

In the M&A context, litigation buyout insurance can address material pending litigation that creates uncertainty affecting valuation or structure. As alternatives to a price reduction or retained seller liability, the parties may seek a policy that covers specified exposure up to its limit and subject to its retention and exclusions.

Litigation buyout insurance can also be used in connection with specific representations in the purchase agreement. If the seller has made representations about the status or exposure of pending litigation, and the RWI underwriter excludes coverage for that litigation based on the known-risk exclusion, the buyer can obtain a litigation buyout policy to fill the gap. This application requires careful coordination between the RWI policy's exclusion schedule and the litigation buyout policy's coverage terms to ensure that the two policies together provide coherent coverage without overlap or gap. The indemnification claims process documentation in the purchase agreement should also be reviewed for consistency with both policies' claim mechanics when multiple insurance products are in play simultaneously.

Market Trends and Pricing Cycles

The RWI market has undergone substantial evolution since the product achieved mainstream adoption in the middle-market M&A context. Understanding the current state of the market, including where premiums are relative to recent cycle highs and lows, how insurer capacity is distributed, and what structural innovations are being offered by specific insurers, allows deal teams to obtain coverage on terms that reflect current market conditions rather than assumptions based on prior deal experience.

RWI pricing and insurer appetite change with claims experience, competition, industry, diligence quality, and the broader insurance market. Buyers should obtain fresh indications rather than use prior-deal economics as a proxy for current cost or coverage.

Available terms may include different treatment of fundamental representations, investigation costs, or sector-specific risks. Buyers should ask their broker to identify which proposed enhancements are actually included in the quoted policy and compare them with exclusions and retention mechanics.

Cross-border coverage may be available for representations governed by multiple legal regimes, but jurisdiction-specific underwriting and exclusions can make those policies more complex. Buyers pursuing international acquisitions should involve brokers and counsel familiar with the relevant jurisdictions early in the process.

Insurer Selection and Market Landscape

The RWI insurer landscape in the United States market includes a mix of large insurance groups with dedicated M&A insurance units, specialty transactional risk underwriters that operate as managing general agents, and Lloyd's market syndicates. Each category of insurer brings different characteristics in terms of capacity, deal-size focus, sector expertise, underwriting flexibility, and claims handling approach. Understanding the landscape allows buyers and their brokers to match the transaction's profile with the insurer best positioned to provide optimal coverage terms.

Insurer appetite and capacity can change with industry, geography, transaction structure, and market conditions. A broker should identify which insurers are currently willing to underwrite the transaction and obtain written indications that allow the buyer to compare proposed limits, retentions, exclusions, coverage periods, and claims provisions.

The relevant comparison is which insurer's current proposal fits the transaction. Headline premium alone does not show the value of a policy if another proposal offers materially different exclusions, definitions, or claims requirements. Buyers should also ask about the proposed insurer's relevant underwriting and claims experience.

Broker Selection and the RFP Process

The broker manages insurer selection, structures the request for proposals, coordinates underwriting, and may assist with policy and exclusion negotiations and post-closing claims. Buyers should assess the broker's transactional-risk experience, conflicts, compensation, claims support, and familiarity with the transaction's industry and jurisdictions.

A competitive process can provide written indications from multiple insurers on premium, retention, limits, coverage periods, and proposed exclusions. The buyer and its advisors can then select an insurer for full underwriting based on the complete proposal and the transaction timeline.

Submitting a transaction summary to a focused group of insurers can create a consistent basis for comparison. The broker should explain any differences among proposals and confirm which terms remain subject to underwriting before the buyer selects an insurer.

One consideration in broker selection that is sometimes overlooked is the broker's claims support capability. Some brokers have dedicated claims advocacy practices that support clients during the post-closing claims period, while others provide only a referral to the insurer's claims department. In the event of a significant breach that results in a material insurance claim, having a broker with the experience and resources to advocate effectively through the claims process is a meaningful advantage. Buyers should ask specifically about each prospective broker's claims track record and post-binding support capabilities before making a selection.

Interplay with Materiality Scrapes in the Purchase Agreement

The materiality scrape is a provision in the purchase agreement that removes materiality and material adverse effect qualifiers from representations and warranties when determining whether a breach has occurred and when calculating the damages resulting from a breach. Without a scrape, a seller can defend against a breach claim by arguing that the inaccuracy in its representation was not material and therefore did not breach the representation as qualified. With a full scrape, any inaccuracy in a representation constitutes a breach regardless of the materiality qualifier, and the damages calculation is performed on an unqualified basis. The materiality scrape is one of the most economically significant provisions in a purchase agreement, and its interaction with RWI coverage is direct and consequential.

The purchase agreement's materiality qualifiers and scrape provisions can affect whether an inaccuracy constitutes a breach and how loss is calculated. The policy may address those qualifiers separately, so deal counsel should compare the agreement's language with the policy's definitions and coverage grant.

A full dual materiality scrape removes specified qualifiers for both breach determination and loss calculation, while a single scrape may apply only to breach determination. The parties should negotiate the purchase agreement position and then confirm that the policy responds consistently with the intended risk allocation.

The drafting of the representations themselves, not just the materiality scrape, affects RWI coverage scope in ways that deal teams should address explicitly during the SPA negotiation. Representations that are qualified by seller's knowledge rather than being absolute are covered by RWI only to the extent that the seller's knowledge was not complete, and the scope of the knowledge qualifier's application to specific facts is often contested in claims. The definition of "knowledge" in the purchase agreement, including whose knowledge counts and whether it is limited to actual knowledge or includes constructive knowledge, should be reviewed against the policy's coverage terms to ensure that the two documents apply consistent standards.

Reps Drafting Under RWI Deals

The drafting of representations and warranties in a purchase agreement where RWI is in place requires a different approach than the drafting conventions that prevail in transactions without insurance. Because the insurer is underwriting the representations and providing coverage for breaches, the representations must be drafted with sufficient breadth and precision to describe the risks the buyer wants to insure while remaining defensible to the seller and acceptable to the underwriter. The tension between broad buyer-favorable representations and seller-favorable qualifications and carve-outs is present in all M&A negotiations, but RWI deals introduce a third party whose coverage terms depend on how that tension is resolved.

RWI can change the parties' incentives when negotiating representations because the insurer may bear specified covered losses while the buyer, seller, or both retain excluded and below-retention risks. The parties should draft each representation to reflect the transaction facts and then confirm how the policy treats it.

Sellers in RWI deals, conversely, need to ensure that the representations they are making are accurate as of the closing date and that the disclosure schedules are complete. In a deal without RWI, a seller that makes an incomplete disclosure might negotiate a narrow survival period or a low cap as protection against a large breach claim, and that negotiated limitation provides some protection even if the disclosure was inadequate. In an RWI deal where the insurer has subrogation rights against the seller for fraud, the seller's primary protection against a post-closing claim is the accuracy and completeness of the representations and disclosures themselves, not the negotiated indemnification limitations. This dynamic gives sellers in RWI deals a stronger incentive to conduct thorough internal due diligence on their own representations before signing than might exist in a conventional indemnification structure.

The interaction between representations drafting and underwriting requires coordination between the two workstreams. If the insurer raises concerns after the purchase agreement is substantially negotiated, the parties may face late-stage agreement changes or additional exclusions. Parallel review of the agreement and policy can identify those issues earlier.

See the guide to indemnification provisions in M&A for a comprehensive treatment of the indemnification structures, basket mechanics, cap provisions, and survival period conventions that form the contractual foundation into which RWI integrates. The M&A transaction services page describes how Acquisition Stars approaches the coordinated drafting of purchase agreement terms and RWI placement as integrated components of transaction risk management.

Working with Acquisition Stars on RWI-Backed Transactions

Acquisition Stars represents buyers and sellers in middle-market M&A transactions where representations and warranties insurance is part of the deal structure. The firm coordinates purchase agreement risk allocation with the proposed policy terms so the documents can be reviewed for gaps and inconsistencies before closing.

Alex Lubyansky advises on incorporating RWI into the transaction structure, drafting purchase agreement terms, coordinating with the insurance broker, reviewing the exclusion schedule, and addressing post-closing claim notices and coverage positions.

For buyers evaluating whether RWI is appropriate for a specific transaction, Acquisition Stars provides a transaction-specific assessment of whether the deal size, competitive context, seller profile, and representation complexity support the use of insurance, and if so, how the policy structure should be integrated into the purchase agreement terms. For sellers whose buyers are proposing an RWI structure, the firm advises on the implications of the insurance structure for the seller's post-closing exposure, the adequacy of the disclosure schedules in the context of the insurer's subrogation rights, and the negotiation of any residual seller indemnification obligations that remain after the RWI policy is in place.

Acquisition Stars handles transactions nationally. The firm's office is located at 26203 Novi Road Suite 200, Novi MI 48375. Reach the firm by phone at 248-266-2790 or by email at consult@acquisitionstars.com. Prospective clients with a transaction in progress can submit transaction details through the form below.