The goal of Reps and Warranties.com is to provide M&A professionals with the information necessary to successfully integrate these products into their transactions and to provide a forum to discuss new developments in this space.
The use of Transactional Risk Insurance products, especially Representation & Warranty Insurance, has exploded in the past three years. For M&A professionals this explosive growth means that these products are more likely to be part of the conversation when transaction negotiations begin. The growth evidences the comfort that M&A professionals and, in particular legal counsel, have with these products and with incorporating them into their deals. M&A professionals have come to appreciate the economic and strategic benefits and efficiencies created by using insurance.
The insurance market is working hard to keep pace with the demand. Currently, there are only a handful of insurance brokers with sufficient expertise to run the process as smoothly as possible. A seasoned broker can ensure the seamless integration of the insurance program into the closing process, minimizing unwanted surprises and delays and freeing up the M&A professionals to focus on the numerous other moving parts they oversee during the transaction.
Over the years, insurers have streamlined the underwriting to accommodate M&A timelines while still ensuring a thorough review of each deal. This requires a good deal of work in a tight timeframe. In a properly managed placement, the insurance broker will keep the process moving to meet the closing deadline. From beginning to end, the process involves numerous steps, including:
- Explaining the process to the parties (particularly buyers who are asked to accept insurance in lieu of traditional indemnities);
- Collecting the preliminary information and preparing market submissions;
- Obtaining competitive terms from the markets;
- Comparing the options and selecting appropriate carriers;
- Managing the flow of confidential information and the exchange of diligence information between the third party advisors and the insurer while simultaneously negotiating the policy form;
- Managing the coverage through the signing and closing; and,
- Post binding follow-up and policy issuance.
In any situation, having experienced insurance professionals representing the insured is key to successfully utilizing these products and getting the right results in the event of a claim.