M&A: A rising tide of large claims

While global mergers and acquisitions activity has been somewhat subdued, representations and warranties insurance (R&W¹) provides both buyers and sellers with a solution that helps reduce transaction risks and assists in facilitating clean exits from investments on both the buy and sell-side – vital in the uncertain economic environment.

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

• Claims severity continues to increase with the largest claims (valued over $10 million) at 19% of material claims, up from 15% in last year’s study and 8% the year before. The average claims size in this band also increased. 
• Frequency of claims notification has remained constant across the wider portfolio, at an average of one in every five policies; increasing further among higher deal sizes.
• In terms of breach types, the frequency of financial statements and material contracts breaches increases with claim size.

"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 unique in the industry.”

AIG has been assisting buyers and sellers with over 5,000 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).}