Quick take
RWI can shift risk, but it does not eliminate the need for strong diligence.
Glossary term
Representations and Warranties Insurance
Representations and warranties insurance, often shortened to RWI, is the policy buyers or sellers use to cover certain losses from breaches of representations and warranties in the purchase agreement. In M&A, it is part of the deal's risk-allocation structure rather than a substitute for diligence.
Why it matters
RWI can change how indemnity risk is allocated, but underwriters still expect disciplined diligence because the policy depends on what the buyer actually reviewed.
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Sorai Editorial
Reviewed by Sorai’s diligence research and workflow design team.
Financial, tax, legal, and transaction process terminology for investor-facing diligence workflows.
Key points
- Helps allocate certain breach risks away from the seller's balance sheet.
- Can reduce escrow pressure in competitive processes.
- Still depends on a documented diligence process for underwriting.
- Does not cover every risk or every known issue.
- Works alongside diligence rather than replacing it.
Related terms
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Frequently asked questions
What is representations and warranties insurance?
It is the insurance policy used to cover certain losses arising from breaches of reps and warranties in the purchase agreement.
Does RWI replace diligence?
No. Underwriters still expect the buyer to run thorough diligence before the policy is bound.
Why does RWI matter in deal execution?
Because it can change indemnity negotiations, escrow structure, and overall deal certainty in competitive transactions.