M&A Claims report 2023


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Notification rates expected to rise amidst challenging economic backdrop according to Howden’s latest M&A claims report

  • While the surge in M&A activity during 2021 has receded, the deal market remains highly active with M&A volumes and values in 2022 in-line with pre-pandemic levels
  • Claims are being made later, with notifications after 24 months rising considerably from 13% in 2021 to 26% in 2022
  • Smaller deals have seen a sharp increase in notifications, with the notification rate more than doubling to almost 10% for deals of €50 million or less

3 April, 2023, London – Howden M&A, the international M&A insurance broker, has today released its annual M&A Insurance Claims Report, analysing the key trends across the UK and Europe. While the notification rate for Warranty & Indemnity (W&I) insurance rose slightly in 2022 to 9%, up from 7% in 2021, Howden indicates that the long tail nature of claims means this rate could increase over the next 12-24 months, as notifications from the M&A boom of 2021 materialise.

Daniel Stock, Managing Director, Howden M&A said: “As we enter a period of greater economic uncertainty, we expect more opportunities for deal makers to take advantage of current market conditions. With such opportunities comes a different set of challenges. The value of M&A insurance is clearer than ever in protecting buyers for undisclosed risk that goes to value.”

Outlook for 2023

  • 2021’s M&A boom is still playing out: Notification rates are expected to rise over the coming year and beyond due to the natural lag between transactions and notifications of a claim. More than half of all M&A deals in 2021 (58%) took place in the second half of the year, meaning many notifications from this are yet to materialise.
  • Deal size will have an impact: While the volume of M&A transactions eased during 2022, there has been a growth in the number of megadeals with an enterprise value of €1 billion or more. The market expectation is that deal sizes will continue to increase, with insurance market capacity rising as new entrants increase the capital available for W&I underwriting of larger M&A deals. Howden predicts that the increasing use of W&I in the biggest M&A deals will be a significant trend in M&A insurance in the years ahead, providing an opportunity for growth for insurance providers, and delivering security and protection for the biggest dealmakers.
  • Economic instability is likely to mean a rise in notifications: As the global economy continues to encounter significant headwinds, Howden expects the downturn to create opportunities for deal making through both consolidation and transformation. However, transactions during economic downturns are more likely to result in unexpected outcomes. Businesses being acquired are more likely to be in distress, and acquirers will be keeping a closer eye on cashflow. In these times, policyholders are expected to take a more precautionary approach and will be increasingly ready to trigger a notification when there is a potential for loss.


    The Howden Claims Report finds that the average time elapsed between policy inception and notification continues to lengthen. In 2022, 15% of notifications were submitted within six months of the policy’s inception, down sharply from 25% in 2021. In addition, 26% of notifications in 2022 were made more than 24 months after policy inception, up significantly from 13% in 2021, reflecting a sharp uptick in third party claims which cannot easily be foreseen.

    In fact, Howden’s 2022 Claims Report found that the vast majority (80%) of notifications made 24 months or more after policy inception were third party claims, with most of these relating to tax audits.

    The report also finds that W&I insurance is being increasingly recognised for smaller M&A deals. While the notification rate for the largest deals is likely to remain relatively high and stable, smaller deals have seen a sharp increase in notifications. For the smallest deals of €50 million or less, the notification rate is now broadly into line with the average, at more than 10%, versus 9% across all deals.

    Asset classes and sectors

    Complexity was one of the key drivers of notification rates across asset classes and sectors. During 2022, real estate deals had an overall notification rate of just 5%, while deals involving operational companies, which have many moving parts including customer contracts, supply chains, plant and machinery and, in many cases, intellectual property, had a rate of 13%.

    Meanwhile, notifications in the financial and professional services sector remained stable at about 17%, while there was a significant rise in notifications from the education sector since 2021, from zero to just over 15% in 2022, explained by the substantial increase in deal volumes in the sector over the reporting period.

    Notifications from hotels fell from 14% in 2021 to 2% in 2022. Tax issues remained a significant factor in these notifications, but issues around financial statements receded. Offices also saw a similarly sharp fall from around 14% to just under 5%.

    Breach events

    Real estate witnessed some marked movements in the type of warranties breached between 2021 and 2022. Tax issues were the single largest cause of a warranty breach in 2022, representing 35% of notifications, up from the 16% share of notifications in 2021. Most of these related to targets in the UK and Germany, suggesting that tax authorities in those jurisdictions stepped up their activities in 2022.

    Taxation breaches in operational business on the other hand fell in 2022 compared to 2021 – down from 21% to 11%. However, notifications relating to compliance with laws increased from 4% to 18% of all notifications. The specific issues were varied but included breach of employment laws, target products breaching applicable regulations, and breach of privacy laws.

    Howden’s data also shows a notable trend in the increase in full limit claims relating to fraud, which can be an early warning sign of economic downturn, as fraud of all kinds increases in this climate. Rising levels of fraud means ensuring the correct level of insurance cover becomes more vital than ever.


    Read the full report