Warranty & Indemnity (W&I) / Representations & Warranties (RWI) insurance underwriters and brokers recently released their 2025 global claim studies, so ARIA reviewed them and summarized the key insights below to update M&A professionals on transaction risk issues and to identify areas for more focused due diligence.
Claim Notifications: The number of claim notifications to insurers continued to rise through 2025 due to improved M&A activity and the wider use of W&I insurance …… simply put, more policies lead to more claims. Euclid Transactional’s third annual Global RWI Claims Study reported a 29% increase in claim notifications compared to its 2024 study, alongside a 23% increase in policies issued. Marsh reported that 2025 claim notifications were up roughly 20% in North America and 30% ~ 45% across EMEA. As the global M&A environment improves, transaction volume gains momentum, deal structures grow in complexity, and W&I policies continue to mature, insurers expect claim notifications to keep trending upwards.
Claim Reporting Lags: This term refers to the time it takes for a claim notification to be made to an insurer after a deal closes. Roughly 80% of all claim notifications occur within 24 months of closing, which makes sense since financial issues, the most common breach type, tend to be found after a full accounting cycle under new ownership. Looking farther out at tail risk, insurers reported that claim notifications after 36 months ranged between 5% to 20% of all their claims depending on the region. Tokio Marine HCC’s 2025 Transaction Claims Report noted that tax and compliance claims frequently emerge years after closing, requiring robust documentation practices and proactive claim notification protocols.
Breach Type Frequency: The most common breach types leading to claim notifications remain, in descending order: financial statements, tax, material contracts, and compliance with laws. Marsh reported financial statement breaches were the leading cause of W&I claims, and account for over 50% of claim payouts. Euclid continues to observe that financial statement breaches occur more frequently in audited target companies than unaudited ones, reinforcing the need for rigorous financial due diligence regardless of audit status. On smaller transactions, there is a greater incidence of compliance breaches which is likely due to more limited legal controls at smaller firms and lighter touch due diligence. On larger transactions (above USD 1 billion EV), intellectual property (IP) and tax claims are more common, reflecting diverse IP portfolios and complex tax positions around the globe. In Asia, tax-driven claims have become particularly prominent with Marsh reporting that approximately 40% of all W&I notifications in the region being related to tax matters. Across all breach types, about 20% of all W&I policies receive a claim notification and those notifications are rarely denied. According to Euclid, only 3% of their claim notifications have been denied and about .5% have led to arbitration or litigation.
Claim Payment Severity: The number of claim notifications resulting in actual loss payments from an insurer has steadily increased and the number of claim payments in excess of USD 1 million has also increased. Euclid advised a 33% rise in claim payments from 2024 and had previously reported that claim payments of USD 10 million or more represented 64% of its paid losses with an average claim payment of USD 5.8 million. While these data points are helpful, W&I claims can be significantly higher than reported by a single insurer as jumbo deals often stack several insurers to spread the risk of a large claim throughout limit layers that can exceed USD 100 million. For reference, it was reported that EQT settled a massive US telecom RWI claim, originally feared to be over USD 700 million, for approximately USD 300 million to USD 400 million. Asia is not immune to large W&I claims as evidenced by Asahi’s Independent Liquor claim that settled for roughly USD 199 million: Asahi wins $199 million settlement over Independent Liquor deal (smh.com.au).
The W&I Insurance Market: Keeping with tradition, insurers annual claim reports generally deliver the message that they are paying claims, and the current premium pricing is not sustainable over the mid-to-long-term. With that said, the current M&A insurance market environment remains competitive, with ample underwriting capacity and continued appetite for complex risk challenges. In other words, W&I insurers are eager to underwrite new policies which means that we are in a “soft” market environment where insureds benefit from generous coverage language and favorable premium pricing. On a related note, insurers are also very willing to underwrite creative solutions for other M&A issues that involve known tax, litigation, and credit risks. This environment creates both opportunity and responsibility for M&A professionals. The opportunity lies in leveraging well-tested M&A insurance products to unlock exits, support valuations, and transfer risks that would otherwise impact deal timing or pricing. The responsibility lies in structuring policies with the help of experienced advisors to ensure coverage will respond as intended and claims will be paid expeditiously. The message for 2026 is clear: enjoy the current competitive underwriting environment and build your M&A insurance programs properly knowing that claims actually do happen.
The M&A transaction insurance market is eager for business, so it is an opportune time to address any unique issues within your organization or portfolio. Give ARIA a call, we would be thrilled to create a solution with you.
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