Representations and warranties insurance (RWI) is as popular as ever today. With increased deal flow combined with buyers and sellers finding value in RWI, the market for RWI is operating at full capacity; insurers are getting to the point where they have to turn down deals because of lack of bandwidth. Here are four tips for buyers to ensure a smooth underwriting process.
- Start early. Previously, two weeks’ lead time before the deal signing to obtain quotes and select an insurer was often plenty. Not anymore. Buyers need to start the RWI process earlier (three to four weeks from signing) than they normally do to ensure that RWI does not delay the deal.
- Find the right broker. We always recommend working with brokers that specialize in RWI. Now, doing so is critical to ensure that your brokers have the necessary relationships with insurers to get their attention and move your deal to the front of the line, when necessary.
- Ask about bandwidth. Ask your broker to confirm that the insurer has the necessary capacity to give proper attention to your deal. And if the insurer is not keeping pace, do not hesitate to remind them of their commitment to bind coverage on time.
- The underwriting call. While not previously a decisive factor, given the current market, buyers should consider insurers that do not include outside counsel on the underwriting call and that provide specific questions in advance. These underwriting calls tend to run more smoothly. Buyers need to do their part, too, by ensuring that diligence reports–a gating item for the underwriting call–are completed in a timely manner and that open diligence questions are closed out to limit follow-up questions from the insurer.