Transactional Liability

From increased warranty and indemnity claims to product evolution, we offer our international experts’ predictions on the opportunities and challenges that the transactional liability market may face in the coming year and beyond.

Transactional Liability predictions
#1 Warranty & Indemnity claims will increase as businesses grapple with difficult global economic conditions

Warranty & Indemnity insurance, which insures losses arising from breaches of warranties (and other liabilities) in M&A deals, has gained significant popularity in recent years.  High volatility in the global economy means frequent claims in the future for this product as ongoing difficult economic conditions sees financial targets fail to match up to buyers’ expectations.  It does not need well publicised failures, such as HP’s purchase of Autonomy, to encourage sales of this product.  Underwriters are in the meantime feeling the brunt of enhanced terms and pricing pressure in this competitive but relatively young market.  There will be an increased spotlight on claims, especially around response times, which may require early and conservative reserving and responsive advisers who understand the sector.  It will be interesting to see how the coverage enhancements play out into the claims arena.

#2 Transactional risk insurers will evolve their products to retain their competitive edge

Significant growth in the transactional risk market means competition among insurers remains fierce.  We shall see aspects of US style cover being adopted by some insurers and brokers will continue to press for this and other coverage enhancements.  In the US, for example, the #MeToo movement has led to some buyers seeking the inclusion of a clause warranting that the company being sold has no undisclosed sexual harassment issues.  However, unlike other more established areas such as D&O, widespread adoption of a standard form of cover will remain a product for the future as insurers react in different ways to the challenges in this emerging market.

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