Carriers
R&W insurance payouts hit record highs as Liberty Mutual flags terms review
By Insurance Wire Staff, . Insurance Wire.
Insurance Business America and Business Insurance both reported Wednesday on new data from Liberty Global Transaction Solutions, the transactional risk arm of Liberty Mutual Insurance Group, showing that representations and warranties insurance, known as warranty and indemnity insurance outside the Americas, is paying out more often and in larger sums than at any point in its history.
Representations and warranties insurance, often called R&W, protects the buyer in a merger or acquisition deal if the seller's representations about the business turn out to be false. When a hidden liability surfaces after a deal closes, the policy pays rather than the seller.
What the numbers show
Liberty Global Transaction Solutions received 176 claim notifications across its regions in 2025, a 26% rise on the prior year and the highest annual total in the six annual reports the unit has published since 2019. Historically, roughly one in five R&W policies generates a notification over its lifetime. The unit now projects that ratio could reach closer to one in four on some recent policy years, with the sharpest increases coming from Europe, the Middle East and Africa since 2023, where coverage has broadened and retentions, the amount a buyer must absorb before the policy pays, have often fallen to zero.
Severity is climbing faster than frequency. Payments of ten million dollars or more now account for about 75% of total dollars paid, up from roughly 68% at the end of 2024. The average payment for claims tied to the 2019 through 2022 policy years was around seven million dollars. For the 2023 year it rose to about nine million, and for 2024 to about thirteen million, though the unit noted that a single very large payment distorts the 2024 figure. In 2025, Liberty Global Transaction Solutions made its largest-ever payment in each of its three operating regions: roughly forty-two million pounds, or about fifty-five million dollars, in EMEA; fifty million dollars in Asia-Pacific; and forty-four million dollars in the Americas.
Accounting and financial issues drove 52% of amounts paid and reserved. Material contract and customer-related problems accounted for 14%. The unit said 84% of its most recent accounting and financial payments involved claims citing more than one issue simultaneously, which suggests that when deals go wrong, they tend to go wrong in several ways at once.
Where the coverage gap sits
The data points to a structural mismatch between what buyers purchase and what they sometimes need. In roughly 21% of claims paid or reserved, the alleged loss amounted to between 10% and 20% of the deal's enterprise value. In about 14% of cases it exceeded 20% of enterprise value. Most buyers cap their coverage at 10% of enterprise value. Of the claims that exceeded that threshold, 57% came from deals valued below 250 million dollars.
That concentration in smaller transactions is the practical issue for brokers right now. A buyer on a mid-market deal who has purchased a limit equal to 10% of enterprise value may be underinsured relative to what the claims data now shows is possible.
What the carrier is signaling
Gareth Rees, global lines leader at Liberty Global Transaction Solutions, said in a statement accompanying the report that "coverage has expanded considerably, retentions have fallen and claims severity continues to increase," and that "the challenge for insurers is to ensure the product adapts as regards pricing structure and coverage terms to enable it to manage the severity it now carries."
Rees also described the trajectory of claims trends as raising "important questions about the long-term sustainability of certain aspects of the product," according to Business Insurance.
Insurance Business America reported that several of the proposed term changes the unit is considering follow a recent paper from the International Underwriting Association, though the specific terms under review were not detailed in either report.
What to watch
The combination of rising frequency and accelerating severity puts the R&W market at an inflection point. Carriers that have competed on broad coverage and low retentions, particularly in EMEA, are now carrying severity they did not price for when those terms were written. Some tightening of conditions appears likely, though the timing and scope remain unclear from the data published so far. For brokers and their clients, the immediate question is whether existing limits on smaller deals still reflect realistic exposure, before any formal term changes arrive.
Sources
1. R&W claims are getting bigger, and insurers are signalling which terms could tighten, insurancebusinessmag.com
2. R&W claims frequency, severity increase: Liberty Mutual, businessinsurance.com
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