Chapter 11: APAC: Asia

Claims Trends

After a dip in deal activity in 2023, we saw an increase in the volume and value of M&A transactions across Asia in 2024. Along with that increase, we have seen a rise in the uptake in M&A-related insurance solutions across jurisdictions and sectors, with insureds consisting of private equity firms, private strategic investors, and government-owned or government-linked entities. Key factors driving this growth in uptake are the growing complexity of cross-border deals, lack of familiarity with certain local regulatory environments, and a higher incidence of seller processes mandating the adoption of M&A insurance solutions in certain transactions. 

While claims frequency in Asia remains lower compared with other, more mature regions, there has been a steady rise in the rate of notifications across Asia with insureds becoming more aware of their claims entitlements as well as the benefits of commencing the claims process early and in accordance with the claims notification requirements. 

Figure 52 shows the proportion of claims by jurisdiction received in Asia, with India receiving the highest proportion, followed by Greater China and Korea. 

Figure 52
Aon Data: Proportion of Claims by Jurisdiction

We also examined the types of breaches most often cited under W&I insurance. This is crucial for deal teams and their advisers to proactively risk manage the transaction process. Identifying the commonly cited breaches helps transacting parties refine their focus areas of the due diligence process – placing more scrutiny on these common themes to ensure accuracy and prevent any unforeseen issues post-transaction. By understanding these trends, transacting parties can also ensure a more robust disclosure processes. 

Compared with last year’s Aon Claims Study Report, which examined notifications in 2023, 2024 saw a heightened variety of breaches being notified to insurers, with the most common being warranties relating to material contracts. Similar to North America and EMEA, tax warranties continue to be one of the most notified warranties breached for W&I insurance. Asia also saw a similar proportion of notifications under compliance with laws, litigation, disclosure of information, and licenses/permits.  

Figure 53
Aon Data: Types of Breach Most Often Notified in Asia

The majority of the W&I claims in 2024 were notifications made to insurers within the first year of the transaction closing, with the rest reported within three years of the transaction closing. We are also seeing Asian insureds becoming more prudent with their claims reporting, preferring to engage with insurers at an early stage or as soon as a potential breach is identified, even if the quantum of loss has not been determined. 

Regarding claims on tax policies in 2024, 67% of notifications were made within the first year of policy inception, whilst 33% were made within two to three years of policy inception. 

With more insurers based in Asia specifically to focus on Asian deals, we also see an increased focus by insurers on improving the claims process in Asia. Some insurers have started to invest in local claims resources, whilst others have dedicated resources in their claims team based in EMEA to focus on Asian deals. 

With a dedicated claims team based in Asia, our clients’ claims are handled by a specialist team that combines strong technical expertise (in both tax and W&I insurances), post-M&A disputes experience, and local language abilities to ensure that clients receive quality input and guidance throughout the claims handling process. 

Over the past years, we noticed various concerns coming from Asian insureds and highlight the following factors that would impact the efficiency of a claims process and its outcome:

• Information gathering for clients sometimes takes longer than expected. This may be because the information is not readily available, requiring time and effort to obtain it from the target company and its employees. 
• Other reasons for a longer claims process include the fact that there could be an ongoing third-party dispute that needs to be resolved before the policy claim can be settled. 
• Early notifications often mean that the quantum may not be specified or provided early on in an initial claims notice. It is useful to bring in quantum experts early in the process to commence quantification to substantiate claims and point the insured in the right direction whilst insurers are determining liability.  

Spotlight on India 

The transactional landscape in India has seen remarkable growth in recent years, with increased deal flow between 2023 and 2024 in comparison with global deal flow. The growing economy in India is ripe for strategic deals driven by significant large transactions. Alongside this growth, Aon Asia has seen significant uptake in W&I insurance as well as tax policies relating to transfer pricing issues, capital gains tax, and double taxation treaties. 

One key highlight is that all of the tax policies in 2024 that served notifications in Aon Asia related to Indian tax policies. Many of these have not triggered the claims process but are preliminary notifications given to insurers whenever there is an audit (typically a routine audit) or query received from tax authorities. It would appear that Indian tax authorities are getting more robust in their investigations process, leading to this increase in notifications.