The use of warranty and indemnity insurance grew to record levels during the first half of 2024.

This is amongst the findings of a study carried out by specialist transactional risk insurance broker, HWF Partners, which shows that 1,540 policies were placed in the first six months of 2024. At the same time, claim numbers under W&I policies have increased alongside payments to insured parties.

The W&I Market Claims Study found that insurers received claim notifications on 11.64% of policies across the review period. The data also shows that claims are more likely on larger transactions, with deals with an enterprise value over £1bn showing a 18.58% notification rate. Ultimately, claims were paid out on 4.32% of policies across the review period.

The study examines claims data from 22 European insurers, which between them have written 15,080 W&I policies since January 2016.

Commenting on the findings, managing director David Wall, who authored the HWF Study, said: “We’ve seen claim numbers increase rapidly over the last 12 months and have been involved in substantial settlements on behalf of our clients.

“Policies frequently cost less than 1% of the maximum payout limit and the recovery rate is material for something designed for unpredictable circumstances, with claims paid out on over 4% of policies. That flow of capital back to insured parties isn’t showing any sign of slowing down.

“It’s vital that all parties involved in M&A transactions can have confidence in a W&I insurance product. Historically there’s been limited visibility on claims in our market, so it was important to us to lead on this report and give clients an objective set of data that should give comfort in using W&I.”

The speed in which claims are being settled is another focus of HWF's report. A quarter of successful claims were paid within six months and some 72.56% of claims were paid within 18 months.

The report also gives practical feedback to users of W&I insurance. Subrogation, it found, is rare, occurring in just 1.85% of claims where there is a payout to an insured, suggesting in practice the prospects of sellers being pursued is quite limited.

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