How are tariffs impacting representations and warranties insurance?

The imposition of a series of new tariffs by the incoming U.S. administration at the beginning of this year and their subsequent pausing, reinstatement and amendment has contributed to global economic uncertainty and a cautious dealmaking environment. The confusion and resulting market turmoil have only deepened with announcements of retaliatory tariffs from key U.S. trading partners and with continued reversals in international trade relations.

This shifting regulatory environment and resultant market volatility, coming at a time when M&A markets were expected to rebound from more than two years of doldrums, contributed to a worldwide dampening of dealmaking. In North America, deal volume has fallen 13%, while deal volume globally is down 22% since Q4 2024, driven in large part by tariff-related uncertainty.^[1] Though worldwide deal volume rose by the end of Q1 by 12.6% year-over-year, a handful of deals in the Asian Pacific region drove those increases; overall, transaction totals are at a 20-year low.^[2]

Despite investors concerns and the ever-shifting economic and political environment, private equity firms and strategic acquirers are adjusting and finding creative ways to manage risk.^[3] Tools like representation and warranty insurance (RWI) have become even more important. With so many other variables at play, RWI can help smooth out negotiations, preserve value for buyers and sellers, and reduce the risk of deals falling apart over avoidable issues.

The current tariff landscape has added a new dimension to how RWI is underwritten in M&A transactions. For dealmakers, understanding how these changes affect underwriting has become critical to deal success.

Observations from recent RWI transactions

WTW has been monitoring tariff-related challenges in RWI underwriting since February, when initial tariffs were announced on Canada and Mexico (which prompted retaliatory tariffs against the U.S.). While some of these measures have since been modified or exemptions granted, they continue to influence the RWI underwriting process.

The good news? Underwriters are taking a nuanced, deal-by-deal approach rather than implementing blanket exclusions or restrictions. This tailored approach makes sense given that the potential impact of tariffs may vary significantly depending on the target, including its industry, supply chain exposure and customer base. To date, WTW has helped clients avoid the application of any tariff-related exclusions in RWI policies we have placed, though the underwriting scrutiny in certain areas has clearly increased.

Below, we highlight some of the key patterns emerging in the current underwriting environment and outline where buyers can expect insurers to focus more closely. Based on our experience, here are five areas receiving heightened attention in transactions where tariffs may have an impact:

1. Valuation: Underwriters want to understand whether the buyer has considered the potential impact of tariffs on the target’s financial performance and whether that has been factored into valuation. In some cases, the buyer may not view tariffs as having a material impact on the target given the nature of a target’s operations or if the buyer has a post-close plan to mitigate impact (e.g., shifting production or identifying alternative suppliers). However, what matters is that the rationale for considering tariffs as part of valuation — or not — is articulated and supported by diligence.

2. Customers and suppliers: Where a target has exposure to cross-border trade, carriers are reviewing customer and supplier dynamics more closely. On the customer side, they want to understand whether buyers have evaluated potential volume reductions or concentration risks, even in the absence of formal termination notices.

   On the supply side, carriers are asking about potential changes in cost structure and whether strategic suppliers can be replaced with those operating in jurisdictions less affected by tariffs, including using domestic suppliers.

3. Compliance with import/export laws: As tariff policies evolve, carriers are increasingly focused on whether the target has complied with applicable import and export laws to date and whether it has appropriate procedures to address them. Buyers are expected to conduct due diligence in this area for assurance that the target’s operations are in line with applicable trade requirements and that no material compliance issues are likely to surface.
4. Interim period risk: In transactions that do not close concurrently with signing, carriers may flag the risk of changes to the tariff regime during the interim period. This is particularly relevant in cross-border transactions with exposure to jurisdictions where tariff pauses or exemptions are set to expire within a certain period. For example, if the interim period overlaps with the end of the current 90-day pause on U.S. tariffs against the EU, and the target imports goods from Europe, carriers may raise additional questions. WTW has helped clients manage this potential interim-period exposure through creative brokering. Contact us if you are in a similar situation.
5. Go-forward strategy: Even where current tariff exposure is limited or well understood, carriers will want to understand how a buyer plans to manage potential changes in the trade environment post-closing. This includes evaluating supply chain flexibility, identifying opportunities to qualify goods under trade agreements (such as the U.S.-Mexico-Canada Agreement) and assessing how customer relationships might be affected by future cost shifts. The goal is to ensure the business remains resilient if tariff rules again change.

How WTW can help

In this rapidly changing trade environment, having an experienced RWI is critical. A nuanced understanding of how underwriters approach tariff-related risks and the ability to advocate effectively on behalf of clients can make the difference between successful policy placement and problematic exclusions or, worse, deal failure.

WTW has a track record of navigating these challenges across a broad range of transactions. We continue to advocate for clients and ensure that tariff considerations are addressed thoughtfully and efficiently while securing comprehensive RWI coverage.

To learn more about how we can assist you, please reach out to a WTW colleague or contact us here.

Footnotes

1. Araullo, Kenneth. 2025. “M&A Deals Outperform, Breaking Seven-Quarter Losing Streak – WTW.” Insurance Business. April 8, 2025. Return to article undo
2. Wang, Echo, Charlie Conchie, and Anousha Sakoui. 2025. “Trump Tariffs Hinder M&a and IPOs in What Was Supposed to Be a Blockbuster Quarter.” Reuters, April 1, 2025. Return to article undo
3. Opong-Fosu, Abena. 2025. “Analysis: Q1 2025 M&A Volumes March to a Strong Close.” Bloomberg Law. April 11, 2025. Return to article undo

Disclaimer

WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Authors

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Rishi Dhir

Head of Canada, Transactional Insurance Solutions

email Email phone 1 647 518 2935

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Simone Bonnet

Head of Transactional Insurance Solutions

email Email phone +1 212 309 0923

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