The purpose of transactional risk insurance products is to facilitate sale transactions by protecting deal participants from risks that arise in due diligence or during negotiations that could inhibit a transaction from closing. Rhodes personnel have extensive experience in dealing with financial institutions on both sides of the transaction.
Representations and warranties insurance is designed to fill the gaps that result between the buyer and seller during their negotiations related to escrow amounts, indemnification caps, and/or survival periods of the representations and warranties. It covers the financial loss, including defense costs, which arise from breaches of representations and warranties made by a target company in the purchase agreement. The R&W insurance typically covers all representations and warranties contained in the purchase agreement, but policies are completely tailored and negotiated on a deal-specific basis with very few exclusions from the insurance carrier. The common exclusions found in these policies are criminal fines/penalties, knowledge of breaches/fraud by the insured’s deal team, and post-closing purchase price adjustments. In a transaction, policies can be obtained for either the buyer or the seller depending on what the parties want to accomplish.