W&I Insights for Q1 2025
The Warranties and Indemnities insurance market is set for a transformational year. Here’s what we see on the horizon.
Increased M&A Activity
and Technology Driven Deals
The market is preparing for a significant uptick in M&A activity in 2025, with technology driven transactions at the forefront. Deal sizes are progressively rising, increasing the demand for towers and excess capacity. Key trends to watch include:
Tech-driven transactions: Cross-border deals in sectors like technology, IP rights, cybersecurity, and data privacy will fuel demand for W&I insurance.
ESG-Centric Deals: ESG compliant transactions are set to become mainstream, with insurers focusing on green energy and sustainability risks.
Real Estate & Infrastructure: These sectors will continue to show strong interest, particularly in jurisdictions that offer favourable regulatory incentives.
Evolving Market Dynamics
W&I insurers are currently navigating a highly competitive market. In 2025, we expect to see the following shifts:
Refined Pricing Strategies: With a highly competitive environment, insurers are likely to adjust pricing strategies, especially for those identified as ‘low risk’ transactions.
Retention Adjustments: Insurers may reduce retention levels, particularly in sectors considered less volatile or more predictable.
Scope of Coverage: We expect insurers to offer more comprehensive policies, expanding coverage to include tax risks, contingent liabilities and partial ESG risks.
Tailored Solutions and Evolving Legal Systems: Clients will demand bespoke solutions to address the specific challenges of the relevant jurisdiction, industry, and deal complexity, and insurers will need to remain agile in this regard.
Key Sources of Claims in 2025
Claims in the W&I insurance market in 2025 will most commonly arise from:
Financial & Tax Liabilities: Undisclosed tax liabilities, transfer pricing issues, and off-balance sheet liabilities will remain major sources of claims.
Environmental & Regulatory Risks: As ESG concerns intensify, claims related to environmental violations, regulatory non-compliance, and data privacy breaches are likely to rise.
Intellectual Property (IP) & Technology Issues: Disputes over IP ownership, cybersecurity breaches, and data protection violations will be a key driver of claims.
Labour & Employment: Undisclosed employee-related liabilities, labour disputes, and challenges around key employee retention could lead to claims.
Financial Accuracy: Misrepresentation of financial statements, revenue recognition issues, and unreported debts will continue to be significant risks.
Contractual Breaches: Claims may arise from undisclosed breaches in commercial contracts and undisclosed contingent liabilities.
Tax Structures and Deal Mechanics: Deal structuring errors, valuations discrepancies, and tax issues are likely to lead to claims.
Operational and Deal-Specific Claims: Claims related to business continuity, supply chain disruptions, and performance issues not disclosed during due diligence could increase.
Employee Retention Disputes: Challenges with enforcing non-compete clauses and employee retention agreements will continue to surface.
Expanding Global Reach
We expect to see growing demand for W&I insurance in regions like Southeast Asia, Eastern Europe, and Latin America as deal activity rises. Meanwhile, in the UK, we expect smaller bolt-on deals and niche acquisitions to dominate in the near term.
In summary, the W&I insurance market in 2025 will see significant progress, driven by an increase in M&A activity, especially in tech-driven industries, and with increased importance places on ESG considerations. Alongside this, we expect to see the market evolve with refined pricing strategies, broader coverage, and tailored solutions to meet the demands of complex deals. As the market remains competitive and more specialised, we stand ready to remain agile to address the new risks and opportunities that this represents!