Reps and warranties insurance was supposed to be a commodity by 2026 — a routine line item buyers added in late diligence, priced predictably and quoted within seventy-two hours. For deals over $200M, it largely is. For the lower-middle market — the $10M to $100M deals that make up the heart of our practice — the market has quietly fragmented. Premiums on $50M deals have widened by 35 to 60 percent against where they sat in early 2024, retention requirements have tightened, and three major carriers have effectively withdrawn from the segment. In this post, I'll walk through what's changed, why it matters for founders preparing for sale and strategic buyers evaluating tuck-ins, and how to plan around it without surprises at the binding stage.

What's actually changed in the 2026 market

The story behind the numbers is straightforward, though the reasons are layered.

Three forces have converged. First, claims data from the 2020–2022 deal vintage finally matured. Carriers underwrote those deals during the COVID-era M&A peak with limited diligence and aggressive pricing, and the breach rate has come in materially higher than the actuarial models assumed. Second, AI-related representations — particularly around training data provenance, IP indemnification, and model output — have introduced a new category of risk that underwriters haven't yet figured out how to price. Third, several mid-market carriers exited or significantly tightened their books in 2024–2025, leaving fewer underwriters competing for sub-$100M placements.

The result is a bifurcated market: large-deal pricing has normalized, even softened. Lower-middle market pricing has not.

"The same $50M deal that quoted at 2.8% of limits in 2023 is quoting at 4.5% today — and that's when we can even get three carriers to offer terms. Two years ago we had six."— Underwriter at a top-five RWI broker, March 2026

What it means for buyers

The practical implications for buyers running M&A programs through 2026:

1. Quote earlier than you used to. What once took 72 hours of broker turnaround for indicative terms now routinely takes 7–10 business days, especially on deals with cross-border elements, recent litigation, or AI- or data-related products. Building this into your LOI-to-signing timeline is no longer optional.
2. Expect tighter retention requirements. Self-insured retentions that sat at 0.75% of total enterprise value in 2023 are now commonly 1.0% to 1.25%, with some carriers requiring a separate excess retention layer for specific representations (cyber, AI, environmental).
3. Plan for carve-outs. Carriers are excluding more categories from coverage outright — particularly representations touching AI training data, cybersecurity, ESG compliance, and tax matters dependent on contested IRS positions. You'll need to negotiate these directly with the seller through traditional indemnification.
4. Budget for the premium math. On a $50M deal, the difference between a 2.8% and a 4.5% premium is roughly $850,000 of additional deal cost. Whether that comes out of the buyer's pocket or the seller's is a real negotiation, not an afterthought.

What it means for founders and sellers

The seller side feels these shifts differently, and the conversation needs to happen earlier than founders typically expect.

If you're a founder preparing for a sale in 2026, the RWI premium widening directly affects three things: the headline price a buyer is willing to pay, the indemnification structure you'll need to accept, and the size of any post-closing escrow or holdback. In a softer market, RWI absorbed most of the indemnification risk and let sellers walk with a clean exit. In today's market, even with RWI in place, the carve-outs and tightened retentions push more risk back onto the seller.

Two practical moves for sellers approaching a sale:

• Engage RWI brokers earlier, ideally before the LOI is signed, even if you're not driving the placement. Understanding what coverage will look like — and what won't be covered — shapes how you negotiate the rest of the deal.
• Don't assume RWI is automatic. Some buyers are walking away from RWI entirely on smaller deals where the premium math no longer pencils out. If your deal is structured assuming RWI absorbs indemnification risk, you may need to renegotiate that assumption mid-transaction.

Final Thoughts

The reps and warranties market has matured into something more complicated than a routine binder line item, and the lower-middle market has felt the shift most. Most of the deals we lead now require strategic decisions about RWI structure that simply weren't on the table two years ago.

The good news is that the work is still doable. The deals still get done, the founders still exit, the strategic acquisitions still close. The shift is in how the conversation needs to be sequenced — early engagement with brokers, clear-eyed scoping of what RWI will and won't cover, and a willingness to use traditional indemnification alongside the policy. These are the moves that have kept our deals on schedule through the past nine months.

If you're working on a transaction in the second half of 2026, the time to think about RWI structure is now — not at term-sheet signing.