The Representations And Warranty Insurance In M&A Deals – How Does It Work ?

Representations and Warranty Insurance

A. Purpose

1. The purpose of the representations and warranty insurance is to cover the financial consequences of claims resulting from a breach of any representations and warranties made by the Seller.

2. The common goal of parties is to ensure that the commitments contained in the Acquisition Agreement matches with the provisions of the insurance contract as accurately as possible. If this condition is satisfied, the contract serves its purpose for both parties: for the guarantor, it transfers the risk of the representations and warranty insurance to a third party; for the beneficiary, it ensures effective coverage of the insolvency risk of the guarantor.