The Evolving Landscape of Representations and Warranties Insurance in 2025

As of mid-2025, the Representations and Warranties Insurance (“RWI”) market is experiencing notable shifts, influenced by fluctuating M&A activity and evolving underwriting practices.

Market Trends

The early part of 2025 saw a continuation of the subdued M&A activity from the previous year, leading to a highly competitive RWI market. Insurers, vying for a limited pool of deals, have offered more favorable terms to attract clients. Premium rates have remained competitive, with some carriers quoting as low as 2.5% of the policy limit. Retention levels have also decreased, with some deals seeing retentions as low as 0.5% of the enterprise value, a notable decrease from the historical standard of 1%.

Additionally, the accessibility of RWI has expanded to include smaller transactions. Coverage is now available for deals as small as $25 million, and minimum premiums have dropped significantly, depending on deal size and structure.

Expectations for Buyers

Buyers can anticipate a more streamlined and flexible underwriting process, especially for lower middle-market deals. However, as M&A activity is expected to pick up in the latter half of 2025, insurers may begin to tighten terms and increase rates. Coverage may become more restrictive, and rates could increase by 10% to 15%. Underwriting processes remain efficient, but buyers should be prepared for heightened scrutiny on diligence quality and deal timelines as M&A activity picks back up.

In short, while current market conditions are favorable, buyers should act swiftly as the market rebalances over the coming months.