An insured distributed dividends from a Spanish entity to a Luxembourg parent entity and sought to rely on a double tax treaty to pay tax in Luxembourg. The insured tax risk arose if the dividends were instead deemed taxable in Spain. The policy was taken out to provide coverage in the event the Spanish Tax Authorities (STA) challenged the tax treatment of the distribution.
Tax Claim
In due course the STA initiated a tax audit, which the insured notified to insurers under the policy terms. The insured engaged with the audit and provided responses to the STA, all with the prior consent of insurers.
The STA duly assessed a liability for withholding tax, alleging that the parent lacked substance in Luxembourg. Insurers provided support for the first instance appeal, which was unsuccessful. Following this, and on the basis the insured was required to pay the alleged tax liability to continue its appeal, insurers paid an Advance Tax Payment to the insured in accordance with the policy terms.
The insured has now filed a second stage appeal in the Spanish Courts and insurers continue to pay defence costs, whilst awaiting a final determination.
Insight
Although early in its life cycle, the specific risk tax product is operating exactly as anticipated, with insurers supporting the dilligenced position by making payments of defence costs and advance tax payments.
References
6 All case studies in this report are hypothetical claim scenarios
based on aggregate factors that the Aon team has seen in practice. The
language of the actual representations in the applicable purchase agreement,
the specific facts of a claim and the coverage afforded by the policy
ultimately will determine the outcome of each scenario.
Scenario
After closing, the Buyer discovers that there are errors in the target company’s financials. These errors include: (1) failing to accrue for costs related to annual plant maintenance; (2) improperly recognizing certain revenue in the trailing twelve months (TTM) period; and (3) overstating the account receivables balance by not writing down impaired collectability risks.
Breach and claims process
The above issues comprise typical breaches of the financial statements representation in the acquisition agreement. The language of the financial statements representation and the standard applied therein (i.e., in accordance with GAAP, industry standard, consistent with past practices, etc.) will control the analysis and claims investigation. The claims process will involve the Insurer’s financial advisor reviewing the material provided by the client’s financial advisor/counsel and then following up with questions aimed at validating breach and the corresponding loss. The challenges that arise during financial statements claims vary greatly but often relate to disagreements over how the breach impacts the buyer’s valuation model, how similar situations may have impacted the purchase price during negotiations, materiality thresholds under GAAP, whether the breach impact is recurring and/or whether the loss valuation is reliant on estimates that were not repped to in the financial statements.
Outcome
Based on our experience, should the above scenario violate the accounting standards provided in the financial statements representation, we would expect the Insurer to recognize breach and loss. Further, we would anticipate that error one (failure to accrue for costs) and error two (improper revenue recognition) would result in more than dollar for dollar loss because those losses are recurring in nature. That recurring loss would likely be based on how the deal was valued. So, for instance, if the deal was valued on an EBITDA multiple then those verified loss amounts would be subject to the same calculation. For error three, we would anticipate that the insurer might take the position that these damages should be reimbursed on a dollar-for-dollar basis, claiming that they are not recurring in nature.
References
6 All case studies in this report are hypothetical claim scenarios
based on aggregate factors that the Aon team has seen in practice. The
language of the actual representations in the applicable purchase agreement,
the specific facts of a claim and the coverage afforded by the policy
ultimately will determine the outcome of each scenario.
Scenario
An insured acquired a target company with several material customers. Following completion, the insured became aware that one of the target’s key customers had in fact terminated its contract with the target prior to signing. The contract represented significant ongoing revenue for the target and was factored into the valuation methodology and the purchase price paid for the target.
The insured submitted its claim to the insurer and breach of the material contracts warranty was quickly established. The policy and SPA were subject to English law and loss was considered on a share-value basis. In order to quantify the loss suffered, both the insured and insurer appointed financial experts, who alongside the parties and their legal advisers considered contemporary evidence of the valuation methodology (which included a multiples basis), the recurring nature of loss given the length of the contract and how the issue would have been dealt with at the time of the transaction, had it been known. Following discussions between insured and insurer, steered by Aon, the parties reached a mutually agreeable commercial compromise and agreed to settle for an eight-figure sum.
Insight
Contemporary evidence of the valuation methodology used in a transaction can be key when advancing a claim with loss on a share value basis. Insurers and insureds will commonly instruct financial experts to consider the quantification of loss, and factors may include the recurring nature of the loss, to what extent the loss is of a type factored into the valuation methodology, how the issue would have been dealt with between the seller and a reasonable buyer had it been known at the time of the transaction as well as the value of the shares and purchase price.
References
6 All case studies in this report are hypothetical claim scenarios
based on aggregate factors that the Aon team has seen in practice. The
language of the actual representations in the applicable purchase agreement,
the specific facts of a claim and the coverage afforded by the policy
ultimately will determine the outcome of each scenario.
Scenario
Post-completion, the insured discovered that there was a third party demand against the target, which was in litigation and where the litigation warranty was considered breached.
The insured submitted its claim to the insurer but did not provide any information or seek the insurer’s consent with regards to significant defence costs being incurred. Aon reminded the insured of the need to involve the insurer in its defence strategy, and the insured settled the third party litigation with the insurer’s involvement and consent to settlement.
Following settlement a discussion followed between insured and insurer on defence costs cover, and Aon assisted the insured in successfully claiming some of its defence costs from the insurer.
Insight
With third party demands it is important for insureds to be aware of insurers’ rights regarding settlement and prior written consent to defence costs, to ensure compliance with policy terms and to avoid curtailing the insured’s own claim.
References
6 All case studies in this report are hypothetical claim scenarios
based on aggregate factors that the Aon team has seen in practice. The
language of the actual representations in the applicable purchase agreement,
the specific facts of a claim and the coverage afforded by the policy
ultimately will determine the outcome of each scenario.
Scenario
An insured submitted its claim notice directly to the insurer without first consulting its broker, who it copied in when submitting the notice. In its drafting of the claim notice, the insured had set out the relevant warranties considered to be breached but only as those warranties were covered under the SPA, not reflecting the seller knowledge scrapes which the insured had purchased as part of its cover under the policy.
Claims Process
Following receipt of the claim notice, the insurer raised various requests for information, including the seller’s knowledge of the issue. Aon flagged to the insured that they were not required to demonstrate seller knowledge as a result of the knowledge scrape enhancement provided under the policy, and assisted the insured in preparing its responses to the RFIs, including setting out that seller knowledge was not required. Breach of warranties was established.
Insight
The policy is the contract agreed between insured and insurer, and should be considered as the first source for the bases of warranties covered, both in relation to scrapes and also in relation to warranty qualifiers.
References
6 All case studies in this report are hypothetical claim scenarios
based on aggregate factors that the Aon team has seen in practice. The
language of the actual representations in the applicable purchase agreement,
the specific facts of a claim and the coverage afforded by the policy
ultimately will determine the outcome of each scenario.
Aon clients recovered more than $440 million in 2025 on R&W insurance claims, a new record for a single year. To date, Aon clients have recovered almost $3 billion on R&W, tax, and litigation insurance claims in North America. Claim severity appears to be on the rise. Since 2023, the annual median payment has risen steadily to a record high median payment of approximately $8.2 million in 2025.
Claim Payments
The Aon North America transactions solutions claims team helped facilitate
approximately 40 R&W insurance claim payments in 2025, totalling more than
$440 million, a single year high. 41% of those payments were eight-figures
versus 27% in 2024. In total, through the end of 2025, Aon clients in
North America have been paid just shy of $1 billion on R&W insurance
claims in the last three years alone. Since 2023, the annual median
payment has risen steadily to a record high median payment in 2025 of $8.2
million (see Figure 1). The average payment in 2025 was $10.4 million, an
amount surpassed only by the average payment in 2019. The 2019 average,
however, was driven by a small number of large claim payments combined
with fewer overall claims compared to the claims resolved in 2025. The
impact of elevated enterprise values and higher multiples—corresponding
with lower retentions and expansion of coverage—appears to be reflected in
our more recent settlement data.
When looking at the data by policy inception year, the median claim
payment has been relatively stable, while the average claim payment has
seen more fluctuation. 2020 policies continue to be an outlier in Aon’s
data, with record low median and average payment amounts. By contrast,
2022 is pacing for the highest average payment amount for any individual
policy year, demonstrating significant variance in the size of claim
payments for recent policy years. 5
Figure 1. Average and Median Payment Size by Settlement Year (R&W) (2019-2025)
Figure 2. Average and Median Payment Size by Policy Inception Year (R&W) (2019-2023)
Paid Claims compared to Policy Limits
Figure 3 illustrates the payments received by Aon clients in North America
as a percentage of policy limits. Overall, 23% of paid claims were greater
than 60% of the policy limit and 14% of paid claims were greater than 80%
of the policy limit. Further, 8% of payments were full limit payments,
with a number of those claims involving a situation where the insurer
recognized the client had suffered a loss well in excess of the policy
limits. The meaningful percentage of claims being paid in excess of 60% of
the policy limit suggests, in our view, that insureds who purchase 10% of
EV may be making a commercially reasonable choice in many circumstances,
although appropriate limits will depend on the specifics of each
transaction. It is worth noting that this data has not changed notably
over the last number of years. This is interesting given that each annual
refresh of the data introduces a diverse mix of new claim
settlements—spanning different breach types, deal sizes, underwriting
approaches, and diligence standards—and, based on this dataset, indicates
that the pattern of insurers actually paying R&W claims has remained
remarkably consistent.
Figure 3. Aon Data: Paid Loss as a Percentage of Policy Limits (2013-2025)
Primary and Excess Claim Payments
Another notable 2025 development was the payment of nine-figure claims.
Between 2023-2025, about 4% of all claims submitted alleged more than $100
million in loss.
These numbers have been driven by increases in the number of active claims
on deals with an enterprise value greater than $1 billion, with 51% of all
claims filed on these deals of this size submitted between 2023-2025.
Of the active claims on deals with an enterprise value greater than $1
billion (comprising 16% of all active claims), 25% are seeking loss in
excess of the policy limit. Claim payments on these deals have been less
frequent to date than deals with a smaller enterprise value, but have
shown the potential to be significant in size. More than 75% of the claims
paid on deals with an enterprise value greater than $1 billion have been
at least eight-figures.
Figure 4. Claim Payment Size for Primary Policies (Aon Data and Insurer Data) (2019-2025)
Figure 5. Claim Payment Size for Excess Policies (Aon Data and Insurer Data) (2019-2025)
Claims Frequency
An additional factor contributing to the higher claim payments in recent
years is the number of claims asserting loss on the basis of a multiple (or
other calculation resulting in more than dollar-for-dollar loss). As shown
in Figure 6, an average of 20.6% of all claims on policies placed between
2021-2025 alleged more than dollar-for-dollar loss, compared to 13.5% of
claims on policies placed between 2016-2019 (with 2020 being an outlier year
at 6%). In 2025, 68% of the total amount paid to insureds was attributable
to loss calculated on the basis of a multiple, driven largely by claims
alleging breaches of the financial statements or material contracts
representations. Prior to 2025, 48% of the total amount paid arises from
loss that is greater than dollar-for-dollar. In addition, in this year’s Aon
North America Insurer Survey (“Insurer Survey”) 67% of insurer respondents
reported they have observed more claims alleging loss on the basis of a
multiple in recent years. This is an increase from 41% of insurers in last
year’s survey.
As claims become more complex, having an experienced claims team that can strategize with and advocate for its clients is essential. As shown in Figures 4 and 5, Aon clients have resolved more claims above $10 million on primary policies, and above $20 million on excess policies, at a higher rate than the rest of the market. The vast majority of Aon claims work their way through the claim process successfully, with only 3% being denied and 1% progressing to arbitration or litigation to reach a resolution.
Figure 6. Percentage of Claims Alleging More than Dollar-for-Dollar Loss by Policy Inception Year (2021-2025)
References
5 These observations are based on the subset of policies that have
produced claims and for which settlement data is available; future
developments could change these patterns.
Chapter 1.2
North America
Claim Frequency and Breach Trends
Analyzes how often claims arise and which breach types are most frequently driving notifications and paid losses in North America.
