Taxing Times for M&A Insurance

Global mergers and acquisitions activity continues at a significant level, with representations and warranties insurance (R&W)^[1]  providing both buyers and sellers with a solution that reduces transaction risks and assists in facilitating clean exits from investments on both the buy and sell-side.

Taxing Times for M&A Insurance, the fourth edition of AIG’s latest M&A Claims Intelligence Series, shows R&W insurance has the potential for both frequent and severe claims and responds to a wide range of deal issues.

• Claims notification frequency has increased (to 26 percent) for deals between $500 million and $1 billion in size, while remaining constant across the wider portfolio, at a claims frequency of one in every five policies
• Claims severity has grown, with a doubling of the most material claims (valued over $10 million), from 8 to 15%, at an average cost of $19 million
• Tax breaches span a wide variety of types of issues, led by corporate income tax, employment, and sales taxes, and are the predominant driver of claims notifications in EMEA

"We’re hearing from our insureds and deal lawyers that they see real value in the AIG claims data,” says Mary Duffy, global head of M&A insurance at AIG. “The insights it provides are simply not accessible from anywhere else.”

AIG has been assisting buyers and sellers with over 4,000 deals insured globally since the late 1990s. AIG’s M&A insurance team is made up of experienced professionals located in strategic offices throughout North America, Europe, and Asia Pacific.

^[1]Usually referred to outside the US as warranties & indemnities insurance (W&I).