Representation And Warranty Insurance In Canada: A Tactical Alternative?

While representation and warranty insurance (RWI) has been available in the Canadian and U.S. insurance marketplaces since the 1990s, it has only more recently gained traction as a risk-allocation tool in negotiated M&A transactions.¹ Together with other related insurance policies such as tax liability and contingent liability insurance, RWI has become a mainstream transactional consideration in a broad range of M&A and capital markets transactions in Canada, with several such policies having been issued in the context of Canadian deals in 2013 alone. As a general rule, RWI is most effective for transactions where the purchase price is between $20 million and$2 billion (due to the limits that may be purchased and the pricing of the coverage).