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.
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.
Claims activity is accelerating rapidly, with a 47% increase in the number of notifications submitted in 2025 versus 2024. Projected ultimate claim frequencies for 2025 sit above the long-accepted 20% benchmark for W&I policies receiving a claim notification.
Claims Frequency
Following our 2025 claims study, we continue to see an increase in claims activity, with the pace of submitted notifications accelerating through 2025 and into 2026. While last year’s study highlighted a 26% rise in notifications submitted in 2024 versus 2023, this trend has intensified, with a 47% year-on-year increase in submitted notifications in 2025 compared with 2024.
Both Aon and insurers are seeing claims being notified earlier in the life of a policy. Figure 25 illustrates the percentage of Aon W&I policies placed in 2017 - 2025 that have had a claim brought against them, alongside insurer data from our survey. The black dotted line distinguishes recent policy years, where general warranty cover remains in place, from older years where only tax and fundamental warranties remain, or the policy is off risk entirely.
9.5% of Aon W&I policies placed in 2025 had a claim notified by 31 December 2025, alongside 12.5% of 2024 policies and 14.4% of 2023 policies. This indicates that these years are already trending as high-frequency claims years, when measured against the prior four years. Insurer survey data points in the same direction, with insurers reporting higher figures for 2023 and 2024 (20.3% and 14.7%, respectively) and 5.7% of 2025 policies already notified.
Figure 26 further illustrates Aon’s notification development in six-month increments for the 2017–2025 policy years. While older years like 2022 saw a slower early build (just over 4% at 12 months), the most recent years (particularly 2024 and 2025) are tracking above historical experience.
Figure 25: Aon and Insurer Data: W&I Claim Frequency (2017–2025)
Notification Frequency
These trends suggest a structural shift towards earlier and more frequent notifications across the market. There are potentially various reasons why this could be the case. The fast-paced W&I underwriting of 2021, the following years of lower deal activity allowed greater time for policy wording negotiation, which could mean that insureds both became more comfortable with the wording provided and also were more knowledgeable and familiar with the policy, resulting in insureds being better positioned to bring claims.
With the M&A market quieter in the early part of 2025, our claims team saw an increase in post-close diligence. Insureds considered not only the next transaction, but also the assets held, to ensure they were best placed to move as market conditions improved. However, the M&A market has now picked up, and as we are still (including in Q1 2026) continuing to see an increase in claims, it may be that these trends reflect a behavioural change in insureds and their advisers, with better knowledge of the product and a sophisticated understanding leading to more awareness of possible coverage and claims being notified earlier.
Figure 26: Aon Data: Notification Frequency Development (2017–2025)
Key Statistics
Total Loss Recovered
$60m
Clients in EMEA recovered in excess of $60m on transaction solution claims in 2025.
Claim Notifications Increase
47%
2025 saw a 47% increase in notifications submitted under W&I Policies.
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.
Chapter 2.2
EMEA
Claim Severity and Payment Trends
W&I claim severity is increasing, with more large, complex matters at the upper end and lower retentions pulling a wider range of smaller issues into paid‑claim territory.
Total Loss Recovered 