Reports: Marsh Looks at R&W Claims by Region 2017-21

The Represenations and Warranties niche is a real specialised market. As many brokers, MGAs and insurtech execs know, the last few years have been very busy in terms in mergers, acquisitions and funding rounds. Now there can be disagreements during the process of making a deal and afterwards. Buyers regret, data, key staff and knowledge transfer, debts, break clauses from existing contracts and more. It’s tricky.

Here’s some background on claims volumes by region from Marsh.

A new report from Marsh Specialty, Global Transactional Risk Claims Report 2022, which analyses over 1,100 claims notifications made to R&W policies placed by Marsh Specialty globally during 2017-2021.

According to the report, sharp rise in representations and warranties (R&W) insurance claims notifications since 2017 is being driven by breaches relating to financial statements, tax, and compliance disputes in the global merger and acquisition (M&A) market.

The report’s main findings are:

·         While claim notifications increased five-fold during 2017-2020, reporting dropped by 28% during 2021 on the preceding year. Marsh Specialty attributes this fall to the decline of mergers and acquisitions activity globally during the COVID-19 pandemic.

·         Three-quarters of R&W claims made during 2017-2021 were instigated within 18 months from policy inception.

·         Financial statements, tax, and compliance disputes consistently remained the most commonly claimed breach types during the reporting period, accounting for 59% of claims notifications overall.

·         R&W insurers have paid over US$500 million in claims settlements to Marsh Specialty clients since 2017.

·         Payments through the first half of 2022 have already exceeded 2021 figures and, given the likely claims arising from the significant number of policies placed in 2021 and 2022 to date, Marsh Specialty expects this figure to reach US$800 million by 2024.