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.
This section introduces the EMEA market by outlining the sharp rise in W&I notifications, the increasing maturity of claims experience, and the broader market implications of those trends. It also summarizes the region’s key claims, timing, breach, and deal-size developments that set up the deeper EMEA analysis in later sections.
EMEA has seen material year-on-year increases in claims notifications, occurring earlier in the policy life, following years of soft pricing. The insurance market will be monitoring the maturation of both policy notification rates and settled claims.
Key numbers & highlights
Total Loss Recovered
$60m
Clients in EMEA recovered in excess of $60m on transaction solution claims in 2025.
R&W Claim Frequency
9.5%
9.5% of policies placed in 2025 had seen a notification by the end of 2025, demonstrating a marked shift in frequency development.
Claim Notifications Increase
47%
2025 saw a 47% increase in notifications submitted under W&I Policies.
R&W Breach Trends
1. Financial Statements
2. Material Contracts
3. Compliance with laws
Top breach types by paid loss continue to be financial statements, material contracts and compliance with laws.
Analysis
Regional M&A Environment and Claims Overview
M&A Environment
As claims activity across EMEA increases significantly, the importance of data around the underlying drivers of those claims is growing as stakeholders in the market seek to improve both diligence and underwriting.
We have analysed Aon’s EMEA W&I and tax insurance portfolio, with a focus on notifications from 2017 - 2025, alongside a structured survey of W&I insurers active in the EMEA market. From this, we have generated evidence-based insights for the M&A market to support clients, insurers, and their advisers in understanding how risk is evolving.
Together, these quantitative and qualitative perspectives provide a robust view of current trends, challenges and opportunities in the transaction liability space.
W&I Claim Frequency
Claims activity on W&I insurance has matured with client engagement. Notification frequency is climbing: in 2025 alone, notifications made on policies placed by Aon were up 47% from those made in 2024, and projected ultimate claim frequencies for the 2025 underwriting year are expected to exceed the long‑standing 20% benchmark. For the 2023 cohort, insurers are already reporting a 20.3% notification rate with c.4 years of cover still to run.
Timing of Notifications
The timing and shape of claims are evolving. A growing share of notifications are arriving earlier in the policy life, with 9.5% of Aon’s 2025 policies seeing a claim by the end of 2025.
Mid‑Market Claim Profile
Mid‑market deals placed by Aon with enterprise values between $250 million and $500 million are generating a disproportionately high share of initial loss claimed, but as reported in the North America section of our study, this is in line with Aon’s expectations given the larger limits available on deals in this range.
Large‑Cap Claim Profile
At the top end, $1 billion‑plus deals continue to show the highest notification rates, although fewer deals in this range may skew the percentages and with more robust post-close diligence for larger deals this is perhaps expected.
Together, these trends point to a market where W&I and tax policies are being claimed against more often, earlier in the policy period, and in a wider variety of claim scenarios.
M&A Perspective
In light of the M&A market dynamics of 2022 onwards (elongated timetables, more disciplined buyers and increasingly exhaustive diligence) insurers may have anticipated fewer claims. Instead, we are seeing the opposite: not only are notifications increasing, but the quantum first asserted by insureds at the point of notification has also risen.
In a challenging economic cycle, growth plans have faltered for some businesses, which may be driving the heightened claims activity. It would, however, be overly simplistic to draw a straight causal line from macroeconomic pressure to claims. In parallel, the user base has become more sophisticated: insureds and their advisers are increasingly fluent in how W&I is intended to respond, more adept at navigating the policy, and—consistent with broader trends noted in this report—more inclined to notify earlier in the post completion lifecycle. The elongated deal timetable and additional focus on risk through diligence and the W&I workstream may also be driving heightened claims.
This is against a backdrop of an extended period of low pricing in a competitive insurance market, driving insurers to compete on policy breadth and scope, resulting in trends such as increased nil, tipping, or dropping retentions, which increase insurer exposure at the foot of claims. We have also seen increased appetite to provide synthetic policies and will consider claims development from such trends to follow in the next period.
What does this mean for the remainder of 2026 and beyond? The recent soft market cycle has likely increased pressure on insurers’ combined ratios, and there is a meaningful risk that some post-2022 underwriting years may prove to be unprofitable as claims continue to develop. Intense competition has limited the use of traditional tools for managing exposure—such as higher retentions, rate increases, and narrower coverage—particularly for insurers seeking to build or preserve market share. In this context, capacity management has become the primary remaining lever, and we have already observed some retrenchment from insurers and reinsurers that are increasingly focused on aggregation risk, especially on larger placements. We anticipate greater underwriting and pricing discipline through the remainder of 2026 and beyond, although the extent of any market correction will depend on the development of prior-year claims and the volume of M&A activity coming to market.
Chapter 2.1
EMEA
Claim Frequency and Notification Timing
Across EMEA, W&I notifications are increasing and arriving earlier in the policy life than prior years, signalling a structural shift in how insureds and advisers are engaging with the product.
Total Loss Recovered 
R&W Claim Frequency 
Claim Notifications Increase 
R&W Breach Trends 
