Marsh has released its Transactional Risk Insurance Claims study, which reveals that since 2016, warranty & indemnity (W&I) claims notifications across Europe, the Middle East and Africa (EMEA) have increased significantly.
Insurance and reinsurance broker Marsh notes that claims notifications have increased by 293% from 2016 to 2018, adding that this substantial rise correlates with greater demand for W&I protection from both buyers and sellers to protect deals.
The study leverages claims data from Marsh JLT Specialty between 2009 and 219, and details 175 loss notifications across 24 countries in EMEA.
According to the study, large deals (ones with a transaction value of more than $1 billion) from 2016 onwards have ultimately had more notifications as a proportion of policies placed, with 17% of these transactions experiencing a notification.
Marsh states that this was a result of the complexity of larger deals and the pressure to execute such transactions in a timely manner. Over the last three years, Marsh says that claims payments made to its clients have increased by roughly $100 million.
Interestingly, the study also reveals that over half of the claims notifications received over the last decade relate to either tax, at 31%, or financial statements warranties, at 23%. Furthermore, between 2012 and 2017, the research shows that there was a significant reduction in the time taken to resolve claims. As an example, Marsh notes that in 2012, 100% of claims notifications took more than two years to resolve, while in 2017, some 66% of claims were resolved and paid within six months.
Managing Director, Private Equity and M&A Practice, Marsh JLT Specialty, Lorraine Lloyd-Thomas said: “As the number of M&A transactions continues to rise, so too is competition in the insurance sector to develop innovative solutions that meet the increased demand for W&I coverage. This means that policy wordings are now very comprehensive and more likely to be triggered in the event of a claim.
“W&I insurance is no longer just a deal facilitation tool but a proven risk transfer mechanism, as buyers and sellers take advantage of the product to protect even the most complex and cross-border deals.”