Spike in warranty and indemnity claims

Warranty and indemnity claims have increased significantly across EMEA since 2016, according to data from Marsh JLT Specialty. Claims notifications shot up 293% from 2016 to 2018 – correlating with increasing demand for W&I insurance by buyers and sellers to protect deals.

The study pulls claims data from between 2009 and 2019, and details 175 loss notifications across 24 EMEA countries. Significantly, large deals (those in excess of US$1bn in transaction value) from 2016 onwards have had more notifications as a proportion of policies placed, with 17% of such transactions experiencing a notification. In Marsh’s experience, this was driven by the complexity of larger deals and pressure to execute transactions quickly. Consequently, claims payments made to Marsh clients has risen to approximately US$100 million over the last three years.

Managing director of the private equity and M&A practice at Marsh JLT Specialty, Lorraine Lloyd-Thomas, says that as the number of M&A transactions continues to rise, so too is competition in insurance, leading to more comprehensive policy wordings which are more likely to be triggered in the event of a claim.

The data also suggests that the majority of claims notifications made during the last decade relate to either tax (31%), or financial statements warranties (23%); and that a significant reduction in the amount of time taken to resolve claims between 2012 and 2017 had occurred.

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