W&I vs. RWI: Key differences for cross-border M&A

For buyers accustomed to representations and warranties insurance (RWI) in the United States, stepping into European warranty and indemnity insurance (W&I) involves navigating shifts in economics, coverage, enhancements, and underwriting process. 

While both solutions protect against unknown historical risks, W&I generally tends to offer lower pricing, smaller retentions, closer alignment with insurers on disclosures and exclusions, and a predominantly written Q&A process. RWI, by contrast, typically offers broader coverage at higher cost; applies a narrower view of what qualifies as disclosed; includes fewer deal-specific exclusions; and relies on a faster, buyer-led underwriting process centered on calls.  

With an increased mergers and acquisitions (M&A) tempo, knowledge of the nuanced differences between the two insurance types is critical to adequately protect an acquisition or investment. 

Below, we outline the key differences between W&I and RWI and provide takeaways for cross-border transactions. 

Snapshot approximate comparison (as of January 2026)

	W&I (Europe)	RWI (US)
Premium rate[1]	0.50–1.50 percent of the insured limit, typically	May exceed 2.50–3.50 percent of the insured limit
Retention	0.25–0.50 percent of enterprise value “Tipping to nil” feature: once losses exceed the retention, the insurer pays from the first dollar (i.e., after the threshold is met, coverage applies retroactively to the entire loss) Nil retention is common for true fundamental warranties	0.40–0.50 percent of enterprise value Drop-down feature: Retention will drop to 0.30–0.40 percent after 12 months Tipping basket generally not available 0.25 percent for true fundamentals is common and nil is negotiable
Representations survival periods	General: Two years Fundamentals and tax: Seven years	General: Three years Fundamentals and tax: Six years
Exclusions	Greater number overall both of standard and deal-specific exclusions	Fewer exclusions overall; deal-specific exclusions are less common and narrower in scope
Disclosure treatment	Data room and buy-side diligence reports deemed disclosed; some public databases may also be deemed disclosed	Data room and buyer’s diligence reports are not deemed disclosed; underwriter must actively exclude or deem issues disclosed as they are identified
Purchase agreement modifications	Includes a warranty-by-warranty spreadsheet outlining the coverage position for each warranty and whether it is covered, partially covered, or excluded	No representation-by-representation spreadsheet; synthetic agreement modifications are limited
Underwriting process	Written Q&A focus Underwriting diligence calls only as needed Timeline of 1–2 weeks	Underwriting diligence call is required Limited follow-up questions Can complete in one week
Seller intervention	In an auction sale, policies can be initiated by the seller and “stapled” to the process	Rare; RWI is usually commissioned as a buyer-led process; however, quotes are frequently included in buyer bids
Diligence model	In an auction sale, seller due diligence may be commissioned, and buyers perform a “top-up” review	Buyer typically commissions full suite of third-party diligence (or equivalent internal diligence)

Enhancements available under W&I policies

Parties increasingly look to W&I policies for cross-border deals because they allow a wider range of tailored enhancements than the more standardized RWI market typically permits. In practice, these enhancements can make a W&I policy resemble a US-style RWI policy, creating a hybrid structure that blends European underwriting discipline with US coverage expectations. Common enhancements include the following:

• Extending coverage period for general warranties to three years


• Knowledge scrape: Removing knowledge qualifiers from the warranties, thereby lowering the bar to recovery under the policy


• New breach cover (interim-period coverage): Covering breaches that arise between signing and closing


• Synthetic non-disclosure of the data room


• Non-disclosure of due diligence reports (although this enhancement is typically not offered together with the data room enhancement referred to above)


• Materiality scrape: Eliminating materiality qualifiers and thresholds for certain warranties when assessing breach or loss (noting that it is standard for RWI policies to include a double materiality scrape for no additional premium), and


• Synthetic indemnity basis of loss: Artificially creating an indemnity measure of loss under the policy (and therefore disapplying the more standard contractual measure of loss found in English law). In addition, this enhancement can be extended so as to give the insured the option to elect for loss to be paid on the basis either of an indemnity or diminution in value (i.e., contractual), either at policy inception or upon notification of a breach under the policy.

These menu enhancements, as well as others not listed here, typically require additional premium. As W&I coverage becomes more similar to RWI, the price also converges. Buyers gain flexibility to tailor W&I policies to more closely mirror the broader coverage profile of a traditional RWI policy, but they should also expect the cost advantage to narrow as enhancements are added. 

Coverage parameters

W&I policies contain more numerous and broader standard and deal-specific exclusions, some of which rarely appear in RWI. For example, W&I policies may exclude product liability and recall, condition of assets, cyber risks, and others which would not typically be excluded in RWI. 

Another defining feature of W&I policies is their approach to disclosure. In European-style transactions, all documents uploaded to the data room are usually treated as disclosed. W&I follows this approach and goes a step further by also treating the contents of the buy-side diligence reports as disclosed. 

RWI follows an entirely different disclosure model. Under US practice, the data room and buyer’s diligence reports are not considered disclosed. The burden is on the underwriter to identify issues and either exclude them or affirmatively deem them disclosed. This fundamental difference in disclosure treatment drives the broader coverage profile of RWI and underscores why disclosure mechanics are central to policy negotiations.  

The drafting of the purchase agreement further exemplifies the coverage differences. European-style agreements typically contain an extensive list of warranties expressed in short, concise statements addressing business matters. The corresponding W&I policy may include a warranty spreadsheet that maps each warranty to the insurer’s coverage position, identifying which warranties are fully covered, partially covered, excluded, or deemed modified. 

US-style purchase agreements by contrast contain representations that are more general and overlapping. There is no corresponding spreadsheet and deemed modifications are limited.

Underwriting process

European W&I underwriting typically follows a structured process centered on formal written Q&A. The underwriter submits a series of questions covering both general background and specific issues identified throughout the review of diligence materials. The buyer and its advisers then respond in writing. Underwriter calls are not mandatory and, if needed, are reserved for matters that remain unresolved after the written exchange which cannot be dealt with in writing.  
RWI underwriting is comparatively condensed and its underwriting diligence call-driven. The process can be completed in as little as a week. Underwriters generally do not use formal written questions and instead conduct an underwriting call with the buyer and its advisors shortly after receiving and reviewing the full diligence package and disclosure schedules. Follow-up questions are typically limited and handled over email. 

Seller intervention and diligence practices

Differences in diligence practices also shape the underwriting process. In European sell side-driven auction processes, sellers often commission third-party vendor diligence reports and provide them to buyers, who commonly perform only limited “top-up” diligence. W&I policies are frequently drawn up on the sell-side, with the seller initiating the process by engaging a broker to solicit quotes and prepare a summary for potential buyers. This “soft staple” approach is widely used, and in larger auction processes, sellers may go further by arranging a “hard staple policy,” selecting an insurer and preparing a ready-to-execute policy package for the winning bidder.

In US-style RWI transactions, buyers typically commission their own full suite of third-party diligence reports. The buyer’s deal team engages its own broker, leads the underwriting process, and interfaces directly with the insurer. The seller and insurer do not interact directly. 

Takeaways for cross-border deals

Navigating W&I and RWI in cross-border transactions is complex and benefits from a nuanced understanding of both markets. Differences in coverage, disclosure mechanics, and underwriting approach can materially impact deal risk allocation. Engaging legal counsel with hands-on experience in these products is critical to structuring coverage effectively, negotiating favorable terms, and anticipating potential pitfalls. 

DLA Piper regularly advises on W&I and RWI across jurisdictions and works closely with leading brokers and insurers to deliver solutions tailored to the transaction’s unique needs. By leveraging advisors, buyers and sellers can streamline the process and secure coverage that aligns with their commercial objectives.

For more information, please contact the authors.