Transactional Risk Global Claims Report 2022

The ever-increasing use of representations and warranties (R&W) insurance policies — also known as warranty and indemnity, or W&I, policies — as a well-established M&A risk management and deal facilitation tool has led to a corresponding increase in claims activity globally.

In this report, we examine over 1,100 claims notified from January 2017 through December 2021 to R&W policies placed by Marsh in jurisdictions around the world.¹ During this period there was exponential growth in the use of R&W insurance in M&A transactions, coupled with a maturing claims profile. We also saw the unfolding of unprecedented global socio-economic and political events, including the COVID-19 pandemic, which have affected major economies. Our commentary, both at a global and regional level, focuses on the impact of those recent events on R&W claims, and outlines how we see this claims landscape evolving over the next few years.

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Global snapshot

Claim notifications increased five-fold in the period 2017-2020 a consistent year-over-year increase in claim notifications from 2017 to 2020.
A decrease in notifications followed in 2021, likely as a result of the impact of COVID-19. We expect claim notifications to increase, starting from late 2022.
The percentage of policies that receive a claim has held steady at a global average of 14% to 16%.²
Over US$500 million has been paid to Marsh clients by R&W insurers since 2017.
Financial statements and tax breaches remain the most commonly reported claims under R&W policies.

Asia Pacific snapshot

Our Asia Pacific clients are seasoned users of W&I insurance and recognize its merits as a deal facilitator that effectively transfers the risk associated with a breach of warranties to the insurance market. The responsiveness of this product in terms of indemnity granted and claims paid, as well as a tried and tested claims management process amongst insurers, has further entrenched W&I insurance as a feature of M&A in the region. Insureds are recognizing the benefits of early notification and a well formulated claims submission with sufficient supporting evidence to substantiate the quantum of loss in paving the way for a successful claims outcome.

In recent years, the number of W&I insurance policies placed in Asia Pacific has increased exponentially. We observed a rapidly growing claims count, with the volume of claims in 2021more than three times the volume in 2017.

¹ This report does not include data from the Pacific Region for the years 2017 and 2018, which was not available. This report also does not incorporate claims data relating to specific tax risk or contingent risk policies.
² For policies where the notification period for most types of breaches has now come to a close.