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.
APAC’s W&I and tax claims data is now sufficient to show clear sector patterns and a distinct timing profile, with direct implications for how deals are structured and insurance is placed in the region.
Across sectors, disclosure, financial statements, compliance with laws and tax are consistently prevalent for dealmakers and underwriters. Understanding how authorities interact and operate in the sector is relevant to tailoring diligence scopes, negotiating transaction documentation and structuring W&I and tax insurance programmes in the region.
Real Estate, Construction, and Infrastructure
Claims frequently arise from undisclosed or underestimated asset-related risks. These include structural defects and weathertightness issues in property portfolios, environmental and lease-related obligations, and capital expenditure or maintenance liabilities that were not fully reflected in the financial statements. In this sector, breaches of condition of assets, environmental and lease covenants, and associated financial statements representations are particularly prominent.
Consumer and Retail
Prevalent issues centre around consumer protection, product and marketing compliance, and the treatment of customer-related liabilities. Claims often involve undisclosed complaint logs or regulatory correspondence, regulatory investigations by consumer protection agencies, and mis-statement of prepaid customer credits (for example, memberships or vouchers) and inventory exposures.
These trends underline the importance of careful review of complaints handling, marketing practices and the accounting for deferred revenue and prepaid balances.
Technology and Payments
The claims highlight authorisation and compliance-driven risk. Common themes include failures to maintain or disclose sector-specific certifications (such as PCI DSS and other security standards), gaps in licensing and permits, and undisclosed issues in key customer or supplier contracts. Because a small number of contracts often drive a large proportion of enterprise value in these sectors, breaches of material contracts, compliance with laws, and disclosure warranties feature heavily.
Cross-Border Corporate and Financial Structures
Particularly for deals centred on Australia and India, the dominant themes are tax and regulatory in nature. Claims submitted under tax insurance policies frequently relate to transfer pricing and related-party financing arrangements, treaty-based capital gains positions, customs and indirect tax exposures, and the interaction of these risks with financial statements and disclosure warranties. These disputes often crystallise several years after completion and are a major driver of the long-tail, high-severity profile of tax and tax-adjacent claims in APAC.
Timing Profile of APAC W&I Claims
The Long-Tail Nature of APAC Claims
The APAC data aligns with the global observation that more than half of W&I notifications arise more than 12 months post-completion, with a particularly pronounced long-tail for tax and regulatory breaches:
Short-tail (0–12 months):
Primarily driven by operational issues, obvious contract breaches, and more visible disclosure gaps (for example, undisclosed loss-making contracts, missing leases, or immediate financial under-performance).
Many of these claims arise as buyers integrate the business and reconcile diligence assumptions with post-completion performance.
Medium-tail (12–36 months):
A broad mix of financial statements, material contracts, employment, and compliance with laws claims.
Regular notifications in this band on Australian and Asian deals as integration and internal audit work mature.
Long-tail (36+ months):
After 36 months coverage under a W&I, policy is limited to pre-closing tax liability and breaches of fundamental representations. Experience has shown that the extended coverage period is particularly valuable to buyers in the instance of pre-closing tax liabilities as these have consistently been notified later in the policy period.
Some APAC tax claims have been notified more than five years after policy inception, in line with audit and reassessment cycles in key jurisdictions.
For buyers, this timing profile reinforces one of the core advantages of using W&I and standalone tax insurance in APAC: protection well beyond the typical one- or two-year escrow or seller indemnity period, particularly in jurisdictions where authorities routinely reopen or extend examination periods.
Key Statistics
Post‑12‑Month Claims
>50%
More than half of W&I notifications in APAC arise more than 12 months post-completion, with a particularly pronounced long-tail for tax and regulatory breaches.
36‑Month Coverage Scope
36m+
After 36 months, coverage under a W&I policy is limited to pre-closing tax liability and breaches of fundamental representations, making extended coverage periods highly valuable.
5‑Year Tax Claims
5y+
Some APAC tax claims have been notified more than five years after policy inception, which is in line with extended audit and reassessment cycles in key jurisdictions
Conclusion
The APAC claims data shows a market that is increasingly contributing its own distinct experience to the global transaction risk landscape. The claims experience on larger, tax-intensive and cross-border deals, coupled with an increasingly assertive regulatory environment, explains the growth in uptake of W&I insurance in APAC. It also demonstrates that W&I and tax insurance is effective in absorbing complex, systemic risks. Hence, the APAC transactional risk market is well placed to remain a stable, long-term feature of the regional M&A landscape.
For dealmakers, the message is two-fold: first, that well-structured insurance can and does protect value in the region. Second, outcomes are heavily influenced by sector-specific diligence, the quality of financial and tax workstreams, and the discipline of post-completion integration.
Post‑12‑Month Claims 
