M&A insurance payouts hit record highs in 2024, driven by R&W claims: Aon

Mergers & Acquisitions (M&A) insurance claims payouts have surged in recent years, with 2024 marking the highest year on record for M&A insurance payouts, according to a recent Aon study.

The research highlights a significant increase in claims activity related to Representations and Warranties (R&W) insurance, also known as Warranty and Indemnity (W&I) insurance.

Aon’s data also revealed that its North America claims team has helped facilitate over 100 paid claims for clients in the last three years.

In 2024 alone, Aon’s NA clients recovered a record $300 million in paid M&A insurance claims, with a median payment of $5.5 million.

The primary drivers for R&W claims in this region were alleged breaches of warranties relating to compliance with laws (20%), followed by tax (17%) and material contracts (13%).

The study also found that activity in Europe, the Middle East and Africa (EMEA) continues to increase year-over-year, with a 26% rise in claims notifications in 2024 alone accounting for over 35% of all paid claims for Aon clients in the region to date.

While breach of tax warranties (26%) was the most frequent driver for W&I claims in EMEA, the largest paid claims steamed from breaches of warranties related to financial statements (27%), compliance with laws (13.2%), and material contracts (11%)

In the Asia Pacific (APAC) region several key trends have emerged, such as 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.

Other trends include a high incidence of disclosure-related breaches in Australia and New Zealand (ANZ) representing almost 30% of W&I claims. As well as a consistent relatively high frequency of claims in smaller transactions particularly in ANZ.

In 2024, India-based risks accounted for over 30% of all Asia claims related to Warranty & Indemnity (W&I) and tax liability policies. Researchers observed that these tax risks stemmed from both cross-border treaty issues and purely domestic Indian tax matters.

In APAC, the top W&I claims drivers were breaches of warranties relating to material contracts (19%) and legal compliance, tax and license permits, all at 12.5% of claims.

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