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📋 '''Representations and warranties''' are the collective set of factual assertions and binding promises embedded in insurance and [[Definition:Reinsurance | reinsurance]] contracts, [[Definition:Mergers and acquisitions (M&A) | acquisition]] agreements, and [[Definition:Delegated underwriting authority (DUA) | delegated authority]] arrangements that define what each party affirms to be true about itself, the subject matter of the transaction, or the [[Definition:Risk | risk]] being transferred. While the singular form — [[Definition:Representation and warranty | representation and warranty]] — describes the concept in the abstract, practitioners almost always encounter these provisions as a package of multiple statements covering topics from [[Definition:Loss reserve | reserve]] accuracy and [[Definition:Regulatory compliance | regulatory compliance]] to the absence of material undisclosed liabilities.

⚙️ In practice, representations and warranties serve as the informational backbone of a deal. During an insurance company acquisition, the seller might represent that all [[Definition:Policy | policies]] have been issued in accordance with applicable law, that [[Definition:Claim | claims]] reserves are established using consistent [[Definition:Actuarial science | actuarial]] methodologies, and that no pending [[Definition:Litigation | litigation]] threatens a material adverse effect. The buyer relies on these statements when determining [[Definition:Premium | purchase price]] and structuring [[Definition:Indemnification | indemnification]] provisions. Breaches discovered after closing — say, an undisclosed pattern of [[Definition:Subrogation | subrogation]] failures or unreported [[Definition:Reinsurance recoverables | reinsurance recoverables]] disputes — can trigger indemnity obligations or activate a [[Definition:Representation and warranty insurance (RWI) | representation and warranty insurance]] policy if one is in place.

💡 Their importance extends well beyond M&A. In [[Definition:Binding authority agreement | binding authority agreements]] between [[Definition:Insurance carrier | carriers]] and [[Definition:Managing general agent (MGA) | MGAs]], the agent typically warrants compliance with [[Definition:Underwriting guidelines | underwriting guidelines]], accurate [[Definition:Bordereaux | bordereaux]] reporting, and maintenance of required [[Definition:Errors and omissions insurance (E&O) | errors and omissions]] coverage. When these representations fail, the carrier may face unexpected [[Definition:Loss ratio (L/R) | loss ratios]] or regulatory scrutiny it did not bargain for. Understanding the scope, materiality thresholds, and survival periods attached to representations and warranties is therefore a core competency for insurance executives, legal counsel, and [[Definition:Due diligence | due diligence]] teams navigating any significant contractual relationship.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Representation and warranty]]
* [[Definition:Representation and warranty insurance (RWI)]]
* [[Definition:Material misrepresentation]]
* [[Definition:Indemnification]]
* [[Definition:Binding authority agreement]]
* [[Definition:Utmost good faith]]
{{Div col end}}

Definition:Representations and warranties - Revision history

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