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Report

Transactional Risk Insurance Global and Asia Claims Report 2024

Get the latest insights in Asia and globally on claims made against representations and warranties (R&W) policies — also known as warranty and indemnity (W&I) policies — reported and paid in 2023.

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2023: A landmark year for Marsh transactional risk insurance claims

Transactions risk claims scaled new heights globally in 2023, both in number, with 362 claims notifications recorded, and in terms of aggregate claims payment amounting to over US$300 million. 

In Asia, the 18 notifications filed across 13 standalone deals amounted to a modest 19% decrease compared to the number of notifications in 2022 with notifications spread across more deals. This trend is consistent with the record 147 transactional risk placements made by Marsh Asia in 2023, and the claim rate has remained stable between 9% and 11% per deal from 2018 to 2023.

Tax breaches were the top driver of losses in Asia, accounting for 32% of all W&I claim notifications

As tax breaches persist across the Asia Pacific, there is an increased emphasis on the scope and breadth of tax warranties and indemnities during the negotiation process. We continue to see an increasing use of the standalone tax liability policy to address this key risk, with a five-fold increase in the number of notifications from the prior year.

Other categories of breaches also increased in frequency

Material contracts breaches often stem from undisclosed deteriorating relationships between key customers and targets. Although these relationships were not at a breaking point at the time of acquisition, they were on the verge of termination. After the deals’ closing, these strained relationships become irreparable, leading to the contracts’ termination.

Timing of claim notifications remained consistent, with most claims filed between the second and third year of a policy lifespan

In 2022, we reported that most claims were filed after the first 24 months from policy inception, a trend that continued in 2023. However, the volume of claims filed in the latter period declined by 22% in 2023.

The region’s claims environment in 2023 has seen a more dispersed approach to notifications, with a third of notifications being recorded at the first-, second-, and third-year post-inception. This suggests the value of a three-year general warranty coverage period on deals, as risks can arise both immediately after an acquisition or later due to prolonged tax audit processes.

Insureds are seeking specific insurer characteristics beyond pricing

The insurance placement marketplace remains competitive with new entrants to the region. Against this backdrop, insurers that offer first-class claims services by focusing on a seamless and commercial-centric process will likely distinguish themselves from their peers with characteristics such as: 

  • Responding to notifications and issuing substantive coverage positions promptly.
  • Sending targeted and reasonable requests for further information, instead of extensive request lists.
  • Taking a commercial approach towards coverage issues and seeking to understand their clients’ perspective. 
  • Delivering quality results that offer settlement outcomes warranted by the facts and merits of the claim.