Liberty Global Transaction Solutions (GTS), part of Liberty Mutual Insurance, has released its fifth annual M&A claims briefing. The 2024 report analyzes insurance claims in mergers and acquisitions since 2019, segmented by industry, region, and cause.
The report shows a sharp decline in global Representations & Warranties (R&W) claims notifications. These dropped to 120 in 2023, a 21% reduction compared to 2022. This downward trend has continued into 2024, though GTS does not expect further significant decreases.
Policy counts have started to climb again, driven by increased activity in lower and mid-market deals. As a result, notification rates are likely to stabilize, reflecting the renewed momentum in M&A transactions within these segments.
Regional differences in claims activity were notable. The Americas experienced the smallest decline in R&W notifications during 2023 and even reported an increase in early 2024, the only region to do so.
In contrast, the EMEA region saw a substantial drop in R&W notifications, with the Asia-Pacific region recording a three-year low in claims activity. These trends highlight the varying economic conditions and deal dynamics influencing M&A markets globally.
The frequency of claims notifications for policies issued in 2022 and 2023 also decreased slightly. This trend is linked to a slower deal environment, giving buyers more time to assess acquisitions amid reduced competition.
Most claims were submitted within 12 months of transaction closures, particularly in the Americas. This pattern suggests insured parties are streamlining their claims processes, focusing efforts early and late in the policy period.
The report notes that a few breach types dominate financial exposure in M&A insurance. Five breach categories accounted for 97% of total amounts paid or reserved, despite representing only 72% of notifications.
Financial breaches made up 14% of claims but represented 59% of the dollars paid or reserved, with an average payout of $15.5 mn per claim. Material contract breaches, though just 7% of notifications, incurred the highest costs, averaging $20 mn per claim.
Third-party claims are also on the rise, with 19% of notifications linked to compliance and regulatory issues, often triggered by government investigations. Intellectual property disputes and wage-related claims further increased defence costs, adding to insurers’ financial exposure.
GTS President Rowan Bamford noted that the rise in third-party claims has prompted insurers to approach litigation risks more cautiously. Greater emphasis is being placed on identifying potential exposures during the due diligence stage.
GTS made its largest-ever claims payment in 2024, totaling €46 mn. Overall, the company has paid or reserved nearly $340 mn for R&W claims, including $125 mn in 2024 alone.
Much of this commitment is tied to deals from the 2021 M&A boom, as policies from that period mature into active claims.
These insights underline evolving trends in M&A insurance and the financial implications of specific claim types for insurers.
