Article / Risk Management
M&As Fuel Reps and Warranties Coverage

A recent article in Risk & Insurance noted that demand for representations and warranties coverage is on the rise for a number of reasons:

  • Increased M&A activity
  • A continued seller-friendly market
  • The increased acceptance of the insurance product by deal makers, including law firms and investment bankers

“(Sellers) are dictating terms, including providing little or no indemnity in deals where they don’t have to set aside a large percentage in escrow for 12 or 18 months,” said Renee Szalkowski, Lockton’s Senior Vice President and Transaction Liability Practice Leader in New York City. “Moreover, there is greater acceptance of the product because pricing — at 3 percent to 4 percent of limits purchased — is more reasonable, and the underwriting process more streamlined.”

Szalkowski and her team expect reps and warranty insurance will continue to be in high demand over the next year as the M&A landscape remains competitive.

“Sellers are retaining post-closing equity positions more frequently and selling management is staying involved,” she said. “This will result in buyers continuing to use reps and warranties policies to protect these relationships post-closing.”

Read the full article and see what Szalkowski recommends clients should expect concerning pricing in the near future.

    
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