Into the Breach

Continuing our trend of how RWI can be successfully utilized in cross-border transactions, to kick-off 2022, Bryan and Gena are joined by John Antonecchia and Sean Flinn of BFL Canada’s M&A and Risk Management Practice, to discuss the current state of RWI in our neighbor to the north. Topics discussed included:

• The development of the M&A practice at BFL Canada.

• Latest update on premiums for Canadian policies.

• Key similarities and differences between RWI policies in Canada and the United States.

• The types of transactions that most frequently utilize RWI in Canada.

• The number of insurance carriers currently offering RWI in Canada.

• Why more US insurance markets should consider expanding into Canada.

Perhaps no innovation better exemplifies the entrepreneurial spirit of transactional risk insurance than the development and growth of tax insurance. This niche product allows the insured to protect against known tax risks in a variety of areas—S corp status, energy credits, REITS, permanent establishment, estate tax, and independent contractor misclassification, to name a few. What’s more, tax insurance can be utilized in both the deal context as well as a stand-alone product for individual taxpayers. To better understand how to effectively use tax insurance and the current state of the tax insurance market, Bryan and Gena are joined by Michael Saitta, Tax Underwriting Counsel at Liberty Global Transaction Solutions, to discuss:

• How tax insurance is similar to and different from traditional representations and warranties insurance.

• The type of risks that tax insurance can—and cannot—protect against.

• The present state of the tax insurance market.

• The tax insurance underwriting process.

• How tax insurance is priced and other key insurance policy elements such as policy limits and retentions.

Continuing our podcast series on career paths in RWI, Bryan and Gena are joined in this latest episode by Thomas Bonfiglio, Senior Vice President, Transactional Risk Practice, CAC Specialty, for an illuminating discussion on the pros and cons of working as a transactional risk insurance broker versus a transactional risk insurance underwriter. Tom draws on his long career as both an underwriter at Concord Specialty Risk and his prior broker position with Aon and now at CAC to provide valuable advice about the advantages and disadvantages of each field. Specific topics include:

• How Tom’s undergraduate training in risk management has informed his career in transactional risk insurance

• How Tom has succeeded as both an underwriter and broker without a law degree

• The challenges facing underwriters in today’s red-hot deal environment

• How brokers can play a critical role in bridging the divide between the insurer and the insured

• The personality traits that he has found are most important for each position

Coming off an exceptionally strong first half of 2021, reps and warranties insurance seems hotter than ever, aided by the receding pandemic, more interest in the product from corporate buyers, and pent-up M&A capital from private equity firms. To re-cap what we have seen so far in 2021, and preview what lies ahead for the second half of the year, Bryan and Gena are joined by Julia Papastavridis, Managing Director and Member at Chief at Aon, with a special reps and warranties insurance mid-year update. Specific topics include:

· How 2021 has compared to both 2020 and 2019 for RWI demand

· The top reasons why the RWI market remains strong

· The current state of the COVID-19 exclusion from carriers

· How potential tax code changes may influence RWI in the months ahead

· The latest trends on RWI premiums and retentions

· The popularity of the product in 363 sales, SPACs, secondaries, and minority investments

· An announcement about the Aon 2022 transactional risk symposium in Miami, Florida!

As corporate buyers turn to RWI as a deal solution, and insurance markets try to find creative ways to expand business in an increasingly competitive space, DUAL Transactional Risk has re-branded itself as DUAL Transaction Solutions and will begin offering excess D&O capacity in addition to its core RWI product. On this episode of the podcast, Bryan and Gena are joined by Dennis Kearns, President DUAL Transaction Solutions, to discuss the new D&O offering and DUAL’s re-branding effort. Specific topics include:

• Background on DUAL and the genesis of the new combined offering

• The state of the current D&O market and the opportunity that DUAL sees

• Synergies between the RWI product and D&O excess coverage, especially for corporate buyers of both products and the financial services marketplace

• How DUAL has built the excess D&O capacity with experienced D&O leaders

• The new structure of the DUAL Transaction Solutions team

The oft-repeated mantra is that representations and warranties insurance is not a replacement for a target company’s underlying insurance policies, making such policies an important ancillary aspect of RWI coverage. But despite the key role that underlying insurance plays in the RWI process, insurance due diligence is not always well understood -- relegated to five minutes on the underwriting call and without the level of detail or sophistication that we customarily see in other specialists areas. To help underwriters better understand underlying insurance policies and the critical role that other underlying insurance plays in deals utilizing representations and warranties insurance, in this episode, Bryan and Gena are joined by Josh Warren, M&A Advisory Practice Leader, the ABD Team, to discuss:

• How RWI underwriters can assess the risk associated with the target company’s underlying insurance policies

• An explanation of prior bad acts coverage and tail policies

• In what circumstances underlying insurers will -- and will not -- waive change in control provisions

• What is really meant to sit “excess of and no broader than” the underlying insurance and the pros and cons of using this approach to limit RWI risk

• How other specialty insurance products -- successor liability, discontinued products -- can be used in tandem with RWI to achieve positive outcomes for insured and insurers alike

• Guidelines on assessing coverage limits in common underlying insurance, such as cyber insurance

With the inter-connected nature of the global economy, M&A deals today frequently have international components. The transactional risk insurance markets have largely “split” by geography in terms of policy type, with “W&I” policies underwritten in Europe and Asia generally offering less robust coverage than “RWI” policies in North America. Some creative carriers have started to offer special “hybrid” policies to bridge the gulf in international deals and offer an integrated insurance solution that borrows from the best of both policy types with appropriate safeguards for insurers. In this episode, Bryan and Gena are joined by A.J. Kritzman, Senior Underwriter, Transactional Risk Insurance, Tokio Marine HCC, to discuss:

• An overview of international transactional risk insurance

• The key structural policy differences between “W&I” policies underwritten by carriers in Europe and Asia and “RWI” policies underwritten by North America carriers

• The treatment of disclosures and scheduled items under each policy type

• Current pricing trends for “W&I” and “RWI”

• How Tokio Marine can design a hybrid policy borrowing elements of “W&I” and “RWI” for your next international transaction

March 2021 marks one-year since COVID-19 took over the United States, rattling the U.S. M&A markets, and grinding deals to a virtual standstill. The advent of the virus also profoundly impacted the reps and warranties insurance product, leading insurers in the spring of 2020 to impose special “COVID-19 exclusions” and requiring heightened due diligence around COVID-19 related risks.

But by December 2020, the markets had shifted yet again, turning red-hot, and culminating in a rush of year-end deals and many U.S. transactional risk markets pulling back from blanket COVID-19 exclusions. With vaccines now here and re-openings on the horizon, where are M&A markets and RWI headed now, in hopefully the final stages of the COVID-19?

To talk about these topics and more, Bryan and Gena are joined by Bill Monat, Executive Vice-President and Transactional Risk Solutions Leader at Willis Towers Watson. Known industry-wide as one of the preeminent thought leaders in the RWI space, Bryan, Gena, and Bill engage in a big-picture discussion on COVID-19 and its impact on reps and warranties insurance, touching on topics such as:

• A revisiting of how 2020 started for M&A markets

• A discussion on the immediate impact felt by COVID-19 starting in March 2020

• The advent of the “COVID-19” exclusion on RWI policies and how different markets initially reacted to the virus

• The market rebound in Q4 of 2020 and how RWI placements finished for the year

• The state of the market today in March 2021 and how insurers have evolved on COVID-19 policy language

• Predictions about how the arrival of the vaccine and gradual reopening will impact M&A and RWI

• Looking back at changes that we thought in 2020 were poised to occur and how the virus impacted their trajectory

Hardly anyone goes to law school or business school to work in transactional risk insurance. Yet, the growth of the RWI industry in the last ten years has led to an explosion of jobs in the field, usually filled by former M&A attorneys who land in the industry by accident. So, how exactly does one go about making a career shift to RWI and what can you expect when you get there?

To answer these questions, Bryan and Gena are joined by David Anderson, CEO & Executive Recruiter at Greenwich Executive Group, and a noted executive recruiter who has a specialty niche in the RWI industry. In the episode, Bryan, Gena, and Dave discuss:

• How Dave’s background as a former reps and warranties underwriter at the Hartford and Concord led him to his current role as a RWI recruiter

• Why a position as an underwriter or broker in RWI is different from—and better than—other in-house jobs

• Skill sets that underwriting shops value beyond just M&A experience

• Future career opportunities in transactional risk niches such as tax insurance and contingent risk

• Pay and benefits that underwriters can expect

Even though RWI is an innovative product, most practitioners in the space utilize a decidedly low-tech approach to the deal process: a seemingly endless stream of emails back and forth between insurers, brokers, insured, and underwriting counsel. This cumbersome process can lead to lost productivity and an inefficient use of time. The RW-Exchange (www.RW-Exchange.com) is a new tech resource that specifically targets the RWI process and aims to make transactional risk insurance placements more streamlined and organized, thereby adding value and saving time.

In this episode, Bryan and Gena go “high-tech” with Kirk Sanderson, Founder and Managing Partner at M&A Insurance Solutions, and the creator of the RW-Exchange, to discuss:

· How Kirk developed the RW-Exchange concept

· An explanation of the features and benefits of the RW-Exchange

· How using this new resource can save insurers, brokers, and attorneys valuable time

· Pricing for the product

· Steps on how to utilize it in your next transaction