For much of the past decade, condition-of-assets issues have occupied a relatively quiet corner of the representations and warranties insurance (RWI) landscape. Even in transactions involving asset‑heavy businesses -- manufacturing platforms, logistics networks, industrial services, multi‑site operations -- underwriters rarely pressed buyers on the depth or methodology of their condition‑of‑assets diligence. The prevailing assumption was that buyers were conducting adequate physical inspections and that asset‑condition policy claims were unlikely to drive outsized losses.
That assumption no longer holds. A series of significant claims across the broader RWI market has pushed asset‑condition risk into sharper focus. Underwriters have responded by tightening diligence expectations, asking more pointed questions and conditioning coverage on thorough, technical diligence. Accordingly, buyers who rely on RWI to backstop asset‑related exposures now face a materially different underwriting environment.
An important element in the dealmaking process
The RWI market’s approach to condition‑of‑assets risk has undergone a meaningful shift. Where underwriters once assumed buyers were conducting robust physical‑asset diligence, they now verify it -- and increasingly condition coverage on it.
For buyers, the takeaway is clear: securing comprehensive RWI coverage requires a more deliberate, technically informed and well‑documented approach to evaluating the target’s physical assets. Deal teams that anticipate these expectations -- by engaging qualified experts early, conducting substantive site‑level reviews, and maintaining clear documentation -- will be better positioned to obtain favorable coverage terms and avoid surprises during underwriting.
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