Roughly one-third of North American M&A disputes involve alleged breaches of seller representations and warranties, according to a 2024 American Bar Association report. Representations and warranties insurance was built to address that exposure. Its rise as a standard feature in middle-market deals has not, however, resolved the confusion around what the product actually covers.
Daniel Posnick (pictured) leads transactional liability and executive risk solutions at IMA Financial Group in Denver. He discusses how the product has changed the M&A conversation and what deal teams most often get wrong.
RWI’s growth has not just added a product to the broker’s portfolio. It has also changed the job itself.
“RWI has transformed the broker’s role from a traditional insurance placement function to a strategic transaction advisor, adding value by driving deal execution, coordinating among parties, and leveraging market expertise to secure the most robust and balanced coverage and outcome for our clients involved in M&A,” Posnick said.
In practice, that means coordinating among buyers, sellers, deal counsel, and underwriters at every stage of the deal. The policy is one piece of what the broker manages. What makes that advisory role harder is how often buyers come to the table with the wrong assumptions about what RWI covers.
Representations and warranties insurance covers financial losses that result from a seller’s breach of representations and warranties in the transaction agreement. It responds only to unknown breaches discovered after closing. Known issues, forward-looking risks, purchase price adjustments, and certain industry-specific exposures fall outside the policy’s scope.
One of the most common misconceptions in M&A, Posnick notes, is that RWI handles any post-closing issue that surfaces. Marsh’s 2024 Global Transactional Risk Insurance Claims Report recorded a 17% increase in claim notifications in 2023 from the prior year. In North America alone, 252 claims were reported on 144 transactions that year.
“Clients are often surprised that known issues, forward-looking risks, purchase price adjustments, and certain industry-specific exposures are typically excluded, making careful diligence and policy negotiation just as important as the insurance itself,” Posnick said.
Posnick also points to a scenario many buyers encounter after closing.
“A common example is when a buyer relies on management’s growth forecast, and post-closing performance falls short,” he said. “Buyers can be surprised to learn that RWI doesn’t insure against missed projections or purchase price adjustment disputes, because those are considered forward-looking risks and deal-mechanics issues rather than breaches of representations and warranties.”
According to Posnick, That specificity is why RWI demands fresh evaluation on every deal. “An RWI policy is a bespoke product, not a one-size-fits-all solution,” he said.
He argues that a broker should evaluate the product against the deal’s specific timelines and risk allocation strategies. The core question, Posnick adds, is whether the policy will create transactional value by reducing escrow and smoothing the path to closing.
The bespoke nature of RWI means market conditions shape what any given policy can deliver. Right now, those conditions are shifting.
Posnick notes that the market has seen carriers exit and new capacity enter in parallel. The cumulative effect of rising claims activity has started to push pricing upward.
“The market continues to evolve with capacity coming online, while others have exited,” he said. “Increased claims activity over the past several years has begun to create somewhat of a hardening effect in the market, where we are seeing pricing increases, some capacity restrictions and greater underwriting scrutiny in areas like customers/suppliers, compliance and employment matters.”
The data supports that assessment. Marsh’s 2025 Global Transactional Risk Insurance Report found that average primary R&W premium rates in North America rose 16% in 2025. That reversed a 14% decline the year before.
In that environment, how a broker manages the underwriting process has a direct bearing on the terms a client can secure.
“The most important thing a broker can do during underwriting is proactively manage the process by identifying potential coverage issues, preparing the client for the underwriter’s diligence requests, and advocating for favorable policy terms,” Posnick said.
“The best outcomes are achieved when brokers leverage their market relationships and transaction experience to negotiate broader coverage, minimize exclusions, and ensure the policy aligns with the deal’s specific risks and objectives.”
