A new form of transaction insurance, regulatory termination fee (RTF) insurance, is emerging in North America, potentially changing how buyers and sellers navigate regulatory approvals and associated risks in mergers and acquisitions.
A newer form of transaction insurance is drawing attention in M&A circles because it could alter one of the main pressure points in heavily regulated deals: the buyer’s obligation to push hard for approvals. Regulatory Termination Fee, or RTF, insurance is designed to move the risk of a reverse termination fee away from the buyer and onto an insurer if the deal fails because regulatory clearance is not obtained. White & Case says that may be attractive for buyers, but it also weakens the economic pain that usually keeps them focused on securing antitrust and other approvals.
That shift matters because reverse termination fees are often the seller’s main remedy if a buyer cannot close. In many private equity-backed transactions, the fee is the principal financial consequence for a failed closing. White & Case warns that if a buyer can cap its exposure at a premium, plus a deductible or retention, it may decide that the cost of continued regulatory pursuit outweighs the value of the transaction. Torys has also noted that RTF insurance is emerging in the US and Canada as a way to bridge buyer-seller disagreements over regulatory risk and to ease concerns about buyer creditworthiness.
The product is still developing, but the underlying fee structures are not small. White & Case said in its fall 2025 Americas M&A newsletter that, across analysed transactions, regulatory termination fees ranged from 1.7% to 6.7% of enterprise value, with larger deals tending to carry lower percentages. Those provisions are commonly triggered by missed outside dates, final government orders that block or restrict the deal, or a buyer’s breach of its obligations to seek approvals.
Even with insurance, contractual drafting remains important. Torys said obtaining RTF coverage typically requires a detailed review of regulatory risk and may still be tied to covenants requiring active efforts under the acquisition agreement. White & Case adds that specific performance clauses may help, but broad language around regulatory efforts can make them hard to enforce in court. That leaves the market with a familiar tension: a tool that can help deals get signed may also make it easier for a buyer to walk away if the approval process becomes difficult.
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