Representations & Warranties Insurance: A Global M&A Perspective

In today's M&A environment, Representations & Warranties (R&W) insurance has become a fixture in dealmaking. At the simplest level, it's insurance that protects a buyer if something the seller says about the business turns out to be wrong. Buyers use it to avoid costly surprises post-closing, and sellers use it to secure a cleaner exit with less money tied up in escrow.

That simplicity is why it's grown so quickly: R&W insurance smooths negotiations, reduces friction around indemnification, and shifts risk to insurers. This article breaks down what R&W insurance is, the mechanics of how it works, who the major providers are, where they operate, the latest market trends since 2023, and the global factors that continue to shape this evolving industry.

R&W insurance steps in when a seller's contractual representations in the purchase agreement prove inaccurate. These reps cover a wide spectrum of issues that could materially impact a business, including:

• Financial statements and accounting accuracy
• Contracts, customer and vendor obligations
• Intellectual property rights
• Legal compliance and litigation exposure
• Environmental matters and regulatory standing

In practice, the policy acts as a backstop to replace or enhance traditional indemnification. Instead of fighting over escrow or chasing sellers for breaches, the buyer turns to the insurer.

Key Dynamics:

• Buy-side dominance: Roughly 90% of policies are buy-side. Buyers prefer this because it provides broader coverage (including fraud), higher limits, longer survival periods, and avoids direct litigation with the seller's management.
• Seller benefits: Sellers reduce or eliminate the need for large escrow accounts, maximize proceeds at closing, and achieve a cleaner exit.
• Underwriting process: Underwriters assess the risk profile of each transaction, looking closely at the reps in the SPA, the terms negotiated, and the depth of diligence. Standard exclusions apply to forward-looking statements, purchase price adjustments, FCPA violations, and underfunded pensions.
• Process: Policies generally start with a non-binding indication before moving to a full underwriting phase, which includes access to virtual data rooms and third-party diligence reports.

Key U.S. Hubs:

Market Size & Projections:

• The global R&W insurance market is projected to reach $11.0B by 2033, reflecting steady growth.
• North America currently leads the market, followed by Europe. Asia-Pacific is expected to post the fastest growth, fueled by emerging market M&A.

Deal Activity and Policy Usage:

• 2023: R&W claims activity jumped, with 309 transactional risk claims filed (+21% YoY). This shows policyholders are increasingly using coverage.
• Q1 2025: Euclid Transactional bound 312 R&W policies globally, a +27% YoY increase and the highest first quarter on record.
• February 2025: A record month with 97 policies bound globally, up 20% vs. February 2024 and 26% vs. January 2025.
• M&A slowdown: Despite high policy issuance, U.S. dealmaking in Q1 2025 was the slowest in 20 years, leading to a hyper-competitive insurance market as providers chased fewer deals.
• Premium rates: Now at historic lows of 2.0%–2.5% of coverage limit, down from 3.5%–4% in 2022.
• Coverage limits: Typically ~10% of enterprise value, with a minimum of ~$5M.
• Market penetration: Estimates suggest 20–25% of U.S. private transactions now use R&W insurance.
• Claims trends: In 2023, 61% of claims fell within the self-insured retention (SIR), down from 71% in 2020. While many claims are absorbed by the SIR, severity remains high, with some payouts reaching hundreds of millions.

• Economic cycles: Economic slowdowns reduce M&A activity, shrinking the pipeline of insurable deals. Insurers compete more aggressively in these conditions, as seen in 2025.
• Trade & tariffs: Shifting international trade policies and tariffs create operational risks for target companies. Insurers are increasingly tailoring exclusions or endorsements to address these exposures.
• Geopolitics: Conflicts, sanctions, and political unrest complicate cross-border deals. Even if not explicitly excluded, these risks influence underwriting standards, premiums, and deal structures.
• Regulation: New requirements in data privacy (GDPR and equivalents), ESG disclosure, antitrust, and foreign investment reviews introduce new reps — and new areas for insurers to cover.
• Claims activity: Both frequency and severity of claims are rising, with insurers showing more willingness to pay valid claims. Some settlements have reached into the hundreds of millions, underscoring the real financial protection value of R&W coverage.

As we move through 2025 and beyond, several key trends will continue to shape the R&W insurance landscape:

• Increased sophistication: Policies are becoming more nuanced, with tailored coverage for sector-specific risks and emerging regulatory requirements.
• Geographic expansion: While North America and Europe remain dominant, Asia-Pacific markets are rapidly adopting R&W insurance as M&A activity increases.
• Technology integration: Insurers are leveraging AI and data analytics to improve underwriting efficiency and risk assessment.
• ESG considerations: Environmental, social, and governance factors are increasingly factored into policy terms and exclusions.

R&W insurance has shifted from a niche product to a standard tool in global M&A. It reduces negotiation friction, delivers cleaner exits for sellers, and provides meaningful downside protection for buyers. While deal volumes are influenced by macro cycles, geopolitics, and regulation, the core value proposition of R&W insurance remains clear: it de-risks transactions.

With leading providers embedded in every major financial hub, and adoption rates continuing to climb, R&W insurance is set to grow further — offering increasingly sophisticated solutions to keep pace with the complexity of modern dealmaking.