Representation & Warranty Insurance (RWI)
Representation & Warranty Insurance (RWI)
Representations & Warranties Insurance (RWI) is a useful tool to mitigate financial losses stemming from unknown or undisclosed issues that may arise subsequent to an M&A transaction.
VALE’s RWI product is a custom insurance policy that provides protection to buyers or sellers against losses arising from the breach of a representation or warranty made in the purchase agreement of an M&A transaction. The policy protects the insured by serving as a replacement or supplement to a traditional indemnity.
VALE’s RWI underwriting team is experienced and knowledgeable and our unique underwriting process established VALE as a leader within the industry. We tailor each policy to insure the specific risks related to the underlying transaction at hand. Coverage can be customized for even the most complex transactions.
What is Rep & Warranty Insurance?
RWI insurance enables parties to an M&A transaction to pro-actively manage transaction risks. Reps & warranties are contractual statements in a Share Purchase Agreement (“SPA”) given by a seller regarding the condition of a Target business at one fixed point in time. The buyer enters into the SPA on the basis that such reps & warranties are true and accurate.
In a typical transaction without RWI insurance, where these reps or warranties turn out to be untrue or inaccurate and, as a result, the buyer suffers financial loss, the seller may be liable to pay damages as compensation for breaches. However, on a deal with a RWI policy in place, the risk is instead transferred to VALE who insures the buyer (or, less frequently, the seller) for loss resulting from such breach of reps or warranties or a claim under a tax indemnity.
RWI benefits all parties to a deal; providing buyers meaningful protection and an artful advantage in the bidding, negotiation, and/or lending processes while allowing sellers a limited indemnity or true “walk away” opportunity.
Strategic Benefits of RWI:
- Enables a prospective buyer to distinguish their bid in a competitive auction process by negotiating more limited recourse from the sellers by supplementing the contractual position with RWI insurance;
- Enables a buyer to supplement protection for breaches of reps & warranties both in terms of value, duration and certainty of payment;
- Allows a buyer to protect relationships with sellers where the management team is rolling over or where the sellers may be commercial business partners post-transaction.
Key Contacts:
Megan Quail
Megan Quail is a Managing Director and Head of North American R&W. She also works directly with executive management on strategic growth initiatives and business development projects. Prior to joining VALE, Megan practiced at a global, full-service law firm where she represented professional liability insurers in coverage and litigation matters involving directors and officers liability (D&O), errors and omissions, and fiduciary liability claims. She also handled complex claims and negotiated settlements under representations and warranties insurance policies.
Megan graduated from Georgetown University with a B.A. in English and Economics and received her J.D. from St. John’s University School of Law.
Managing Director & Head of R&W
Megan Quail
Megan Quail is a Managing Director and Head of North...
James Melvin
James Melvin is a Senior Vice President of North American R&W. Prior to joining VALE, James practiced at a full-service law firm where he represented international and domestic insurers in coverage and litigation matters with a focus in the areas of healthcare and professional liability. He also acted as monitoring counsel handling complex claims, conducting portfolio reviews, and negotiating settlements under various professional liability insurance policies.
James graduated from Georgetown University with a B.S. in Finance and International Business and received his J.D. from St. John’s University School of Law.
Director & Underwriter, R&W
James Melvin
James Melvin is a Senior Vice President of North American...