Press release

The new age of representations and warranties insurance in M&A transactions


On 9 June, Pérez-Llorca’s Corporate team held a round table entitled “The new age of representations and warranties insurance in M&A transactions”. Moderated by Julio Lujambio, partner of the Corporate practice area of Pérez-Llorca, the participants of the round table were Carmen Reyna, partner of the Corporate practice area of Pérez-Llorca, Marta Batallam, Senior M&A Underwriter at ANV, and Eduardo Real de Asúa, General Director of Howden Iberia.

Numerous lawyers from companies, banks, investment funds and private equity funds attended the event.

Carmen Reyna began by explaining both the development and the traditional regulation of the seller’s liabilities in sale and purchase agreements, emphasising sellers’ ever-increasing interest in a clean exit. Reyna reviewed the mechanisms traditionally used to guarantee the fulfilment of the seller’s representations in the sale and purchase agreement (deposits, price reductions, bank guarantees), before sharing her recent experience of representations and warranties insurance to cover seller responsibilities in M&A transactions.

Eduardo Real de Asúa recounted the development of representations and warranties insurance from the 90’s to the current day. In particular, he signalled how a larger presence of insurers in the market has meant more competition and therefore, a higher number of competitive policies in both the cover offered (in line with M&A practice), and with regard to premiums. In particular, Real Asúa highlighted that in 2015 the number policies taken out grew considerably.

Next, Marta Batalla highlighted the main differences between buy-side policies and seller-side policies, and explained the most important practical aspects of R&W insurance.

In this way, the three speakers detailed the most important steps to follow in the process of underwriting policy, highlighting the biggest challenges and the documentation needed. Furthermore, they evaluated the most important terms of this type of policy, one by one: compensable damages, exclusions, the duration of the policy, limits on liability, excess and premiums.

To conclude, Batalla explained how the claims process works and the right of defence in the event of damages.

After the round table, Lujambio opened the floor to the audience, to ask questions on the specifics of the subscription process, cover, premium calculation, excess and exclusions from R&W insurance. Many of the attendees said that they were increasingly coming into contact with this type of policy, and posed a number of questions with a very practical focus, sparking an interesting discussion between the moderator, speakers and attendees.

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