Representations and Warranties Insurance in 2025 M&A: Trends and Best Practices

In today’s relatively subdued M&A landscape, representations and warranties insurance (RWI) has become increasingly accessible to mid-market dealmakers, with carriers providing buyers with favorable pricing, broader coverage, and flexible terms.

While RWI can help protect dealmakers from unanticipated losses, it’s not without complications. RWI claims are on the rise. New tariffs are creating volatility. And with M&A activity expected to pick up in the latter half of 2025, buyers may soon face more scrutiny from underwriters on due diligence quality and deal timelines.

RWI isn’t your typical insurance transaction, but the right broker can help ensure a seamless experience. Here’s what middle-market dealmakers need to know.

At a Glance

• With valuations under pressure and financing tight, RWI is increasingly important for — and attractive to — middle-market dealmakers.
• In 2025, emerging RWI trends include favorable terms for buyers, tariff-related challenges, and a growing use of RWI in secondary transactions.
• Navigating RWI doesn’t have to be overly complicated. Having the right broker by your side is key.

Why RWI Matters in M&A

RWI is a type of M&A coverage that protects the buyer (and sometimes the seller) from financial losses if the seller’s contractual statements about the business — its reps and warranties in the purchase agreement — turn out to be false or inaccurate after closing.

RWI offers several strategic advantages to middle-market buyers, including:

• Faster, smoother closings. RWI can reduce or eliminate escrow/holdback requirements. This allows sellers to receive more cash at closing and distribute greater portions of the purchase price to their investors (in a private-equity context) or retain proceeds (in an owner/operator context) — creating liquidity, which is particularly valuable in today’s high-interest-rate environment. RWI also speeds up deal negotiations by resolving indemnity disagreements with a policy instead of wrangling over contracts.
• Additional protections that go beyond purchase agreement provisions, like the negotiated indemnity cap, which sets a maximum amount the seller is obligated to pay a buyer for losses or damages arising from contract breaches, and/or the timeframe in which a claim can be made (i.e., survival periods). RWI also protects buyers against the solvency risk of an unsecured indemnity provided by a financially distressed seller, putting buyers in a more defensible position against claims of inadequate due diligence due to impartial reviews conducted by insurance carriers.

• Preservation of key relationships by mitigating the need for a buyer to pursue claims against the seller’s management team, who are — in many cases — now working for the buyer. For public to private transactions, it also gives shareholders an alternative recourse to file claims.
• Enhancing bid competitiveness. Buyers offering a “seller-friendly” RWI structure with minimal indemnities, modest liability caps, short survival periods, and reduced escrow amounts for breaches can differentiate themselves for in-demand targets and auctions.

Emerging Trends Shaping Reps and Warranties Insurance

The RWI landscape is evolving fast, with buyers gaining leverage while tariffs and the shifting deal market impact stakeholders’ risk assessments. The following are key trends shaping RWI in 2025.

It’s a buyer’s market.

Carrier capacity and aggressive pursuit of market share are driving coverage pricing into a policy limits range of 2.5% to 3%, down from ~5% in early 2022. This shift puts downward pressure on retentions (i.e., the insured’s deductible). Carriers are also offering terms and conditions that benefit the buyer, from higher coverage limits and fewer exclusions to lower premiums and simplified underwriting processes.

Some carriers are also considering smaller transactions and, in certain cases, are willing to accept internal buy-side due diligence — a potentially cheaper option for buyers. However, the latter comes with a tradeoff in coverage terms and carrier interest, and third-party due diligence is still recommended due to the protections it offers the buyer.

Tariffs are creating challenges.

The shifting tariff environment adds a degree of volatility to any M&A opportunity, and insurers are incorporating this into their underwriting approach. Carriers are not necessarily looking at blanket exclusions (carriers that are doing so should not be considered for RWI) but rather want to understand how the buyer is viewing tariff-related risk from a valuation perspective, as well as any potential impacts on supply chain, transaction timing, and post-transaction strategy. Addressing tariff-related issues early in the process mitigates potential risks as the deal progresses.

Use of RWI in secondary transactions is growing.

The secondary market hit record highs in 2024, driven by increased liquidity demands in a challenging exit environment. RWI is purchased on 20% to 30% of secondary-led deals, largely to address potential conflicts of the private equity sponsor. The coverage provides an added measure of comfort to the various parties facing unique exposure in a transaction, including sponsors, secondary investors, and limited partners. Some of the obstacles associated with traditional RWI deals are less restrictive for secondary transactions; coverage can be broader for excluded obligations, the underwriting process a little more streamlined, and pricing lower.

Financial reps, customer and contracts, and compliance continue to drive claims.

These three areas represent approximately 78% of all RWI claims and should be taken into account during the RWI process. While tax claims comprise a smaller percentage, they can be particularly expensive; therefore, tax liabilities should be subject to thorough third-party due diligence.

RWI Best Practices: The Right Broker is Key

Having the right broker in place to guide dealmakers through the RWI process is essential. Here are some critical points to consider:

1. Start with a clear and detailed timeline. Key milestones include signing NDAs, gaining access to the data room, reviewing and presenting carrier indications, recommending a carrier, underwriting, conducting an underwriting diligence call, and, of course, closing.
2. Transparency is key. Since deals are typically shrouded in secrecy, signed NDAs establish comfort in sharing information and due diligence reports with carriers throughout the process.
3. Buyers must understand what is required — and why. Carriers need solid information to underwrite a deal. A lack of audited financials for the target, for example, can derail the RWI process. Poor third-party due diligence in areas such as legal, tax, environmental, intellectual property, IT, insurance, and regulatory may limit the interest of prospective carriers, negatively impacting coverage and pricing.
4. Present a clear and comprehensive case. When it comes time for the underwriting due diligence call, a good broker will prepare a clear agenda and help demonstrate that the buyer has done their due diligence, reviewed legal and financial issues, and disclosed any outstanding claims. It’s about making a clear case as to why the prospective deal is a good fit — including analysis of operations, market fit, negotiations, valuation, challenges, and, ultimately, post-close integration.

Additionally, a carrier’s history and claims services capabilities (e.g., whether they are expedient in resolving claims) should be part of the decision-making process. And don’t forget to consider the non-refundable underwriting fee (plus any surplus line taxes and fees).

Achieve a Seamless RWI Experience

The end goal of any RWI process is twofold: the buyer gets the best policy at a competitive price, and the carrier is confident in the terms they’re providing based on the due diligence conducted. This is especially important in today’s M&A landscape, where volatility prevails and pressure on valuations and financing remains high. 

The right broker — ideally a specialist in RWI who can draw on a wide breadth of other business services and industry expertise — can make the endeavor seamless, managing the flow of information between the buyer and carrier from start to finish.

Discover how CBIZ helps M&A dealmakers navigate the RWI process with ease.