DEAL STRUCTURE

Representations and warranties insurance, explained for sellers

Representations and warranties insurance (RWI) is a policy, usually bought by the buyer, that pays for losses from breaches of the seller's representations in the purchase agreement. For a seller, its main effect is that less of the price is held back: in SRS Acquiom's 2025 data, the median of all escrows was 2.8 percent of deal value in insured deals versus 10 percent without insurance. Healthcare policies often exclude known issues and may limit coverage for billing and reimbursement matters, so it does not remove every risk.

By Akim Guennani, Founder · Updated October 2026

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2.8%

Median of all escrows as share of deal value, 2025 deals with RWI

57%

RWI deals using non-survival provisions for seller representations

+16%

Change in average North America primary layer R&W premium rates, 2025

How RWI works

The buyer typically purchases the policy, often with the cost shared or reflected in price. If a representation you made turns out to be wrong, such as about your financial statements, compliance, or contracts, the buyer claims against the insurer instead of against you or your escrow, above a retention amount.

Many insured deals are structured so that the seller has little or no ongoing indemnity obligation for general representations. In SRS Acquiom's 2026 study, 57 percent of deals with RWI used non-survival provisions for seller representations, meaning those representations end at closing.

What RWI usually does not cover

Insurers underwrite the buyer's diligence, so anything diligence found is usually excluded.

Known issues: Problems disclosed or discovered in diligence before signing.
Some healthcare matters: Policies may exclude or limit billing, coding, and reimbursement risks, depending on the underwriter.
Purchase price adjustments: Working capital true-ups are handled separately.
Fraud: Seller fraud remains the seller's responsibility.

When it makes sense

RWI has a cost and an underwriting process, so it is more common in larger transactions. Marsh reported that average primary layer premium rates in North America rose 16 percent in 2025 after falling in 2024, as deal volume and claims picked up. If you are speaking with private equity backed buyers, ask early whether they plan to use RWI, because it changes how much of your price is held back and for how long.

What changes for you in an insured deal

SRS Acquiom's 2026 study found that in 2025 deals without RWI, all escrows averaged 12.1 percent of transaction value, with a median of 10.0 percent. In deals with RWI, the average fell to 5.1 percent and the median to 2.8 percent. More than half of insured deals used non-survival provisions, so the seller's general representations ended at closing.

Marsh's 2025 transactional risk report recorded a reversal in pricing, with average primary layer R&W premium rates in North America up 16 percent year over year, alongside record global limits placed. Higher pricing can make buyers more selective about using RWI on smaller deals.

Illustrative example: escrow with and without RWI

On a $20,000,000 sale, an escrow at the 10 percent median for uninsured deals holds back $2,000,000. At the 2.8 percent median for insured deals, the holdback is $560,000, so $1,440,000 more reaches you at closing. The figures are hypothetical and actual terms vary.

Preparing for an insured deal

Underwriters rely on the buyer's diligence, so a clean process helps coverage.

Owner checklist

Complete, accurate disclosure schedules
Financial statements and a quality of earnings ready for review
Compliance policies, audits, and payer correspondence organized
Known issues identified early, so they can be priced or escrowed separately
Clarity on who pays the premium and retention
Agreement on which representations survive closing

How Lartico fits in

Buyers in Lartico's network range from large private equity platforms that routinely use RWI to smaller operators that do not. Knowing which buyers you are speaking with helps you anticipate how much of your price will be held back.

Sources and methodology

Public transactions provide market context, not a valuation quote for a private practice. Illustrative examples use hypothetical assumptions and are not predictions. This guide is educational and is not legal, tax, accounting, or investment advice.

1. SRS Acquiom 2026 M&A Deal Terms Study highlights (DealLawyers.com). Escrow sizes with and without RWI, and non-survival provisions in RWI deals.
2. Marsh reports shifts in transactional risk insurance market in 2025 (Marsh, March 2026). North America premium rate change and record limits placed.

Reviewed October 2026

Questions owners ask

Straight answers, before you commit to anything.

Who buys R&W insurance, the buyer or the seller?+

Usually the buyer, though the cost may be shared or reflected in the price. Sell-side policies exist but are less common.

How does R&W insurance affect my escrow?+

Insured deals hold back much less. In SRS Acquiom's 2025 data, the median of all escrows was 2.8 percent of deal value with RWI and 10 percent without it.

Does R&W insurance cover Medicare or Medicaid billing issues?+

Often only partly. Policies typically exclude known issues and may limit billing, coding, and reimbursement coverage, so buyers may still ask for a special escrow.

Is R&W insurance used in small practice sales?+

Less often, because of cost and underwriting time. It is more common as deal size grows.

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