March 20, 2017

R&W Insurance: Growing Beyond Private Equity

This Cooley blog says that 2017 should see continued growth in rep & warranty insurance outside of the traditional private equity market:

As the underwriting process has streamlined, and premiums have come down in the US, R&W insurance has secured a significant position in the M&A toolbox for middle-market M&A nationwide (outside of the PE context). Most financial buyers and now many strategic buyers increasingly use these policies as a means to manage risk and to help facilitate a deal.

With the underwriting process now shortened to about a week and policy negotiations standardizing, R&W insurance is poised to become more mainstream in non-private equity deals.

Although it is too early to tell whether the volume of claims will make these policies sustainable – or whether strategic buyers will agree to buy R&W insurance considering their relative leverage in most transactions – targets and buyers alike should be prepared to discuss insurance as a component of any private deal.

This Woodruff-Sawyer blog provides additional insight from the underwriters’ perspective into how the market for R&W insurance is evolving.

John Jenkins