8 hours ago
New Heights for M&A Insurance Claims Payouts, Aon Study Reveals
CHICAGO--(BUSINESS WIRE)-- Aon plc (NYSE: AON), a leading global professional services firm, today announced the latest edition of its Global Transaction Solutions Claims Study, informed by Aon's proprietary claims data and surveyed insurer data. The study reveals there has been a significant increase in claims activity around Representations and Warranties (R&W) insurance, also known as Warranty and Indemnity (W&I) insurance, with 2024 being the highest year on record for M&A insurance payouts.
Aon's North America claims team has helped facilitate over 100 paid claims for clients in the last three years, including 39 in 2024 alone, which recovered over $300m, with a median payment of $5.5m.
Activity in Europe, the Middle East and Africa (EMEA) continues to increase year-over-year, with claims notifications up by 26 percent in 2024 and the quantum of W&I claims payments up significantly, with recoveries in 2024 alone accounting for more than 35 percent of all paid claims for Aon clients in the region to date. The study analyzes claims severity and payment trends in EMEA against the wider backdrop of regional M&A deal activity, with a spotlight on key jurisdictions and success stories.
In the Asia Pacific (APAC) region, a number of key trends have emerged including an increasing variety of categories of W&I breaches being claimed in Asia, including an increasing proportion of regulatory, litigation-related and disclosure-related claims, a high incidence of disclosure-related breaches in Australia and New Zealand (ANZ) representing almost 30 percent of W&I claims, as well as a consistent relatively high frequency of claims in smaller transactions particularly in ANZ. Asia has also seen a larger number of W&I and tax liability policy claims coming out of India-based risks in 2024 (making up more than 30 percent of all Asia claims), with tax risks relating to both cross-border treaty matters as well as fully domestic Indian tax risks.
Drivers of R&W and W&I claims
In North America, R&W claims were driven by alleged breaches of warranties relating to compliance with laws (20 percent), followed by tax (17 percent) and material contracts (13 percent).
In EMEA, breach of tax warranties (26 percent) represented the top driver by frequency for W&I claims, but the biggest drivers of paid claims were breaches of warranties relating to financial statements (27 percent), compliance with laws (13.2 percent) and material contracts (11 percent).
In APAC, the top W&I claims drivers were breaches of warranties relating to material contracts (19 percent) and legal compliance, tax and license permits, all at 12.5 percent of claims.
Cross-industry comparisons
Aon's Global Transaction Solutions Claims Study analyzes industry sectors in North America to draw comparisons between deals, claims and payments and the issues driving loss. Despite the different risk profiles between sectors, there is a remarkably even distribution across the identified industries for claim frequency and severity when compared to the percentage of deals they comprise in the overall deal pipeline.
Dealmakers can apply the sector insights gathered to inform their approach for subsequent M&A activity in that industry, while insurers may be comforted that there is no one 'high risk' industry for R&W breaches.
'Understanding global M&A insurance claims trends isn't just insightful — it's essential to helping our clients navigate risk and make smarter deal decisions. R&W insurance has become an embedded part of dealmaking and risk mitigation, as evidenced through this most recent record year in claims payouts. It offers critical protection that enables transaction execution with greater confidence,' said Stephen Davidson, global head of claims at Aon. 'This study reinforces that while the coverage itself is vital, the real key to successful claims outcomes lies in collaboration. When insurers, brokers and insureds work together, we consistently see fair, efficient resolutions that preserve deal value and support long-term client success.'
Other key findings from the report include:
Aon has been involved in over 1,600 notified R&W and W&I claims, helping its clients to secure over $1.75bn in payments globally.
More than $500m has been paid to Aon clients on notices submitted more than 12 months post-close of the transaction.
To the end of 2024, the Aon claims team has worked with insurers to recover almost $200m in paid claims for Aon's EMEA clients.
A steady rise in the rate of notifications across Asia shows insureds becoming more aware of policy benefits and the importance of engaging with their broker at the inception of the claim.
About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.
