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📋 '''Representation and warranty''' refers to a formal statement of fact or promise made by one party to another within an [[Definition:Insurance contract | insurance contract]], [[Definition:Reinsurance | reinsurance]] agreement, or related transaction document. In insurance, representations are assertions about the current or past state of affairs — such as an applicant's claims history or a company's financial condition — while warranties are commitments that certain conditions are or will remain true. These declarations form the factual bedrock upon which [[Definition:Underwriting | underwriting]] decisions, [[Definition:Premium | premium]] calculations, and coverage terms are built, and their accuracy directly affects the enforceability of the agreement.

⚙️ When an insured or a counterparty makes a representation and warranty, the receiving party — typically an [[Definition:Insurance carrier | insurer]], [[Definition:Reinsurer | reinsurer]], or acquiring entity — relies on those statements to assess [[Definition:Risk | risk]] and set contract terms. If a representation turns out to be materially false or a warranty is breached, the aggrieved party may have grounds to void coverage, deny a [[Definition:Claim | claim]], or seek indemnification. In [[Definition:Mergers and acquisitions (M&A) | M&A]] transactions involving insurance companies, for instance, the seller typically represents the accuracy of [[Definition:Loss reserve | loss reserves]], the absence of undisclosed [[Definition:Litigation | litigation]], and compliance with [[Definition:Regulatory compliance | regulatory requirements]]. The distinction between a representation (a snapshot assertion) and a warranty (an ongoing or forward-looking guarantee) can have significant legal consequences depending on the jurisdiction and governing law.

💡 Getting representations and warranties right is critical because they allocate risk between the parties before money changes hands. A poorly drafted or inaccurate representation can unravel an entire [[Definition:Policy | policy]] or transaction after the fact, exposing one side to losses it never intended to bear. For [[Definition:Underwriter | underwriters]] evaluating complex commercial risks or [[Definition:Due diligence | due diligence]] teams reviewing insurance portfolios, scrutinizing these statements is not a formality — it is an essential gatekeeping function that protects the financial integrity of the deal and the solvency of the organization.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Representation and warranty insurance (RWI)]]
* [[Definition:Material misrepresentation]]
* [[Definition:Warranty (insurance)]]
* [[Definition:Utmost good faith]]
* [[Definition:Insurance contract]]
* [[Definition:Due diligence]]
{{Div col end}}

Definition:Representation and warranty - Revision history

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