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Assessing the Impact of the COVID-19 Pandemic on the Reps and Warranties Market

By Joao dos Santos

April 15, 2020

The COVID-19 pandemic continues to disrupt operations and M&A activity for companies across all industries. Based on our experience and interactions with clients, we expect an increase in the number of representations and warranties insurance (RWI) claims. We also anticipate that underwriters will intensify due diligence to account for pandemic risks when drafting new RWI policies, and that COVID-19 related losses will be excluded from future RWI policies.

Of particular relevance are representations potentially impacted by the COVID-19 pandemic, such as those related to: customer and supplier relationships, accounts receivable, historical stability of the business, undisclosed liabilities, financial statements adequacy, compliance with laws (e.g., labor and employment), and adequacy of insurance. This shift creates new challenges for both insurers and policyholders to identify and untangle potential confounding impacts of the pandemic from other events.

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