R&W claims are getting bigger, and insurers are signalling which terms could tighten

Representations and warranties (R&W) insurance, known as warranty and indemnity (W&I) outside the Americas, is paying out more often and in larger amounts. One of the market’s main carriers says the product’s terms will have to change to keep up.

Liberty Global Transaction Solutions (GTS) received 176 R&W notifications across its regions in 2025, its highest annual total and an increase of about 26% on 2024. Its H1 data projects a further, more modest rise this year. Historically, about one in five R&W policies generates a notification during its lifecycle, but GTS projects this could be closer to one in four on some recent years of account. The rise is sharpest in EMEA from the 2023 year of account onwards, where coverage has broadened and retentions have often tipped to nil.

Severity is rising faster. Payments of US$10 million or more now make up about 75% of the dollars GTS has paid out, up from about 68% at the end of 2024. Its average payment was around US$7 million for claims notified to the 2019 to 2022 years of account. That rose to US$9 million for 2023 and US$13 million for 2024, although GTS said one very large payment skews the 2024 figure. In 2025, GTS made its largest-ever payment in each region: about £42 million (around US$55 million) in EMEA, US$50 million in APAC and US$44 million in the Americas.

Accounting and financial issues account for 52% of amounts paid and reserved, followed by material contract and customer issues at 14%. GTS said 84% of its most recent accounting and financial payments involve claims citing multiple issues.

GTS links the rise in severity to how deals and claims have changed:

• Retentions that were commonly 1.5% of enterprise value before 2023 are now mostly below 0.5%.
• Nil seller recourse deals have spread, which GTS said weakens sellers’ incentive to make thorough disclosures.
• More policyholders appear to be running post-closing reviews to look for breaches.
• More claims are using valuation-based loss calculations rather than dollar-for-dollar losses.

The report sets out where terms could change:

• Policy periods. Claims notified in the third year after closing made up 15% of notifications on the 2019 to 2022 years of account but 33% of dollars paid and reserved. GTS expects debate over a default 24-month policy period, with a third year available for extra premium.
• Drop-down retentions. These could be pushed out, reduced or limited.
• Nil seller recourse deals. These could attract much higher rates and tighter cover.
• Notification. Notification of circumstances could be required within 60 or 90 days.
• Valuation-based damages. These could be capped, filtered or made an express coverage election.
• Third-party claims. These could be isolated within the policy with sub-limits.
• Mexican tax. GTS now regards Mexican tax issues as effectively uninsurable.

Several of these proposals follow a recent International Underwriting Association paper that GTS cites.

“Coverage has expanded considerably, retentions have fallen and claims severity continues to increase,” said Gareth Rees, global lines leader at GTS. “The challenge for insurers is to ensure the product adapts as regards pricing structure and coverage terms to enable it to manage the severity it now carries.”

The data also points to a gap on the buyer’s side. In about 21% of the claims GTS has paid or reserved, the alleged loss was 10% to 20% of deal enterprise value, and in about 14% it exceeded 20%. Most buyers still stop at 10% of EV. Of the claims above that level, 57% involved deals under US$250 million.

For brokers placing transactional risk cover, limit adequacy on smaller deals is the clearest issue to raise with clients now, ahead of the term changes GTS expects.