Representation and Warranty Insurance (RWI) has been in the marketplace for some time but is not used in many merger transactions. At a high level, the product provides insurance against certain indemnifiable losses that may be incurred if there has been a breach of a representation or warranty. The insurer takes a fee in exchange for assuming the risk of such loss. Often, the insurance will provide excess coverage only in the event that losses are greater than the escrow amount or will insure only against certain types of claims (such as environmental or intellectual property matters).
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