What is reps and warranties insurance in M&A?

RWI has spread from large buyouts to practice-sized deals. Marsh reports a significant rise in insured deals of $50 million enterprise value and below, and its North American healthcare placements almost doubled in 2025, driven by behavioral health, dental and physician practice deals. Without RWI, the seller backs its representations with an indemnity escrow: in SRS Acquiom's 2024 deal data the median general indemnification escrow was 10.0% of transaction value when no RWI was identified, against 0.35% when it was, and escrows were held for a median of 12 months. With RWI, the buyer's policy pays covered losses above a retention, which Marsh puts at 0.5% to 0.75% of enterprise value for US and Canadian deals in early 2026. The premium runs about 3.0% to 3.7% of the policy limit on Marsh's figures, and Gallagher's deal data, mostly from technology deals, show the buyer now pays it in most deals; sellers paid it about 17% of the time in 2025. CRC Group puts limits at 10% to 20% of the purchase price, with policy terms of three to six years. Healthcare used to be treated as a higher-risk sector, but WTW reported in 2025 that insurers have broadened their appetite and are more flexible on the billing and coding exposures they traditionally excluded. Underwriters build the policy on the buyer's diligence, so gaps in financial, tax or legal diligence lead to broader exclusions, and issues flagged in diligence are carved out of coverage and have to be settled between buyer and seller.