Representations and Warranties Insurance: How insurers are responding to the pandemic

COVID-19 Resources Mergers & Acquisitions

In light of the COVID-19 pandemic and the far-reaching impacts on businesses across the globe, insurers offering Representations and Warranties Insurance (RWI) are working to develop new protocols, many of which are still in flux and developing.  Some areas of focus are:

• Diligence – underwriters are adding impacts from the COVID-19 pandemic as an area of “heightened risk” in their proposals and asking detailed questions on diligence calls about the effects of the pandemic on the target business.

• Exclusions – insurers are adding exclusions to RWI policies for COVID-19 impacts. In some cases, these are broad exclusions, but this is evolving as dealmakers negotiate policies and some insurers have been willing to limit exclusions to specific items (e.g. any special representations added by buyers to the purchase agreement to specifically address COVID-19 impacts).

• Bringdown – in pre-closing “bringdown” calls, insurers are asking detailed questions about potential breaches of representations by sellers that may be related to COVID-19 impacts and what the buyer is aware of, in order to potentially find “interim breaches” that may not be covered by the policy.

If you are working on an M&A transaction that includes or has the potential to involve RWI, please feel free to reach out to a Wyrick Robbins attorney for guidance on these issues.