Representations and warranties insurance (“R&W insurance”) is insurance that covers contractual representations and warranties made by sellers in an acquisition. The use of R&W insurance allows parties to allocate to an insurer the risks relating to breaches of representations and warranties.R&W insurance benefits a buyer by increasing the scope of indemnification beyond the coverage provided by a seller and extending the representation and warranty survival period. In asset deals, especially if the seller is selling all or substantially all of its assets, R&W insurance gives the buyer confidence that it will be able to recover from the insurer in cases where the seller does not have assets remaining to satisfy its liabilities.R&W insurance also benefits a seller by lowering or eliminating the cap on seller’s indemnity, reducing the amount of sale proceeds required to be held in escrow, and expediting the negotiations and sale process.The majority of policies currently issued are buyer-side policies. A buyer-side policy is purchased on behalf of the buyer, and allows the buyer to recover directly from the insurer for losses incurred as a result of seller’s breach of a representation or warranty. A seller-side policy is purchased on behalf of the seller, and minimizes seller’s escrow or indemnification obligations. As a result, an R&W insurance policy, whether buyer-side or seller-side, shifts the risk of loss from the seller to an insurer, while also ensuring that the buyer will recover regardless of seller’s ability to pay.R&W insurance is gaining in popularity. The American Bar Association (“ABA”) survey, which analyzed the terms of 139 publicly-available private acquisition agreements in 2016 and the first half of 2017, found that 29% of such agreements included R&W insurance coverage. According to another deal survey, of the 93 private transactions reviewed between January 2016 and September 2018, 65% of the purchase agreements included the use of R&W insurance. What both surveys noted is that the use of R&W insurance has increased in recent years. This increase is due to the lowering of insurance premiums, streamlined application process and increased familiarity and comfort with the insurance process and terms.R&W insurance is meant to cover all representations and warranties in a deal. However, the policy is not a perfect substitute for indemnification because it does not cover everything that an indemnity obligation would typically cover. For example, R&W insurance typically does not cover breaches of covenants, post-closing adjustments or known liabilities. In oil and gas deals, specifically, some of the main risks a buyer faces relate to title and environmental matters. The parties usually address title and environmental issues though a defect mechanism rather than representations and warranties. Environmental representations are sometimes covered by stand-alone environmental insurance policies. However, environmental insurance policies are increasingly supplemented by excess coverage through R&W insurance. Additionally, R&W insurance can be useful in covering other risks which are common in oil and gas deals. According to AIG’s Representations and Warranties Insurance Global Study analyzing deals between 2011 and 2018, representations and warranties relating to financial statements, tax matters, compliance with laws, and material contracts are the most frequently alleged representations to have been breached. As a result of its utility in these areas, R&W insurance is increasingly used in oil and gas transactions.Finally, it is important to consider the impact that R&W insurance policies have on other deal terms. Agreements providing for R&W insurance typically also provide for a reduction of a buyer’s indemnification claim for any insurance proceeds received. In addition, according to the ABA survey, in those agreements that included R&W insurance, 23% of such agreements provided that R&W insurance is the buyer’s sole source of recovery, while another 18% provided that R&W insurance was the sole source of recovery for non-fundamental representations. Other terms to consider in relation to R&W insurance include representations and warranties survival period, deductibles and baskets, indemnity caps, escrow terms, and materiality scrapes.With increasing market comfort with and use of R&W insurance, it is important to keep in mind its utility and limitations. R&W insurance may be a helpful tool to minimize exposure in oil and gas transactions. Dasha K. HodgeThompson & Knight LLP  American Bar Association, Private Target Mergers & Acquisitions Deal Points Study (2017). James J. Moriarty & Major McCargo, Deal Points Study: Representations and Warranties Insurance Continues Its Significant Influence on M&A Deal Terms, Kramer Levin (Dec. 3, 2018). AIG – M&A Insurance – The New Normal? (2018). American Bar Association, Private Target Mergers & Acquisitions Deal Points Study (2017).