Core Cover: W&I/R&W
(Transactional risk market)

3. Core Cover: W&I/R&W (Transactional risk market)

In this section we explore the latest themes, practices and conditions, offering insights into how insurers are approaching transactional risk. We also look to the future and highlight the features that are expected to shape the market over the coming months.

After subdued deal activity in 2023/24, the market recovery has accelerated through 2025 with rising deal volumes and larger transactions. Minority investments are giving way to traditional full acquisitions, while in emerging M&A markets underwriters are broadening appetite to capture new opportunities.

Evolving deal dynamics

As deal teams navigated a challenging transactional landscape, market pressures echoed familiar themes from 2021. With buyer-seller valuation mismatches causing many deals to stall, strategic adjustments were required to bridge gaps and resume sale processes. Private Equity (PE) firms have adapted by reshaping their approach to value creation, moving beyond traditional exits and focusing less on platform deals and instead directing more attention to asset optimisation through bolt-ons, entering new markets, acquiring competitors and expanding product lines.

Key trends observed:

Buyer-seller valuation gaps led to deal delays and strategic reassessments.
Pre-sale restructuring of target groups became a common resolution to enhance deal attractiveness.
Increased use of traditional contractual mechanisms such as deferred consideration to close valuation gaps.
Growth in secondary transactions as PE houses sought alternative exit strategies.
Underwriters expanded offerings to include secondary transaction insurance, supporting liquidity in constrained markets.

Trends in H1 2025 M&A activity

The first half of 2025 was marked by strong Q1 momentum, a temporary slowdown in April following US tariff announcements, and a rapid rebound as clarity returned. Transactional risk insurance uptake has risen sharply, not only in mature markets but also in the Middle East, Latin America and Southeast Asia.

Key developments from H1 2025:

Strong H1 deal activity with high-quality assets entering the market.
Abrupt slowdown in April due to US-announced global tariffs, triggering
strategic reassessments by buyers.
Rebound in M&A activity as market participants gained clarity on tariff impacts.
Significant uptick in transactional risk insurance policies compared to 2023 and 2024.
Increased adoption not just in mature markets but also in Middle Eastern, Latin American, and Southeast Asian transactions.

Insurance capacity

In recent months, the global M&A insurance market has been shaped by continued capacity consolidation and strategic expansion. Underwriting appetite continues to broaden, both regionally and by sector, as insurers respond to a soft market and increasing deal flow.

Key developments:

Capacity consolidation:

Momentum appears to have slowed, with fewer new market announcements in 2024 and H1 2025.

Regional expansion:

Three new insurers/MGAs entered both the African and Spanish markets.
Israeli market now sees over 10 insurers/MGAs quoting regularly on M&A deals.
North America welcomed new entrants despite low premium rates; single-risk limits exceeding USD $1 billion remain achievable.

Underwriting behaviour:

Insurers still prefer tower ventilation over full-line deployments.
Slight trend toward larger primary line commitments among established players.
Overall capacity remains sufficient across most regions and deal types, with slower future growth expected.

Sector appetite expansion:

Increased insurer comfort with riskier sectors such as financial services and life sciences.
Driven by greater risk tolerance and improved in-house tools for analysing complex targets, especially those with significant IP assets.

Market dynamics:

The soft market has encouraged insurers to stay competitive and protect market share.
As M&A volumes rise, deals previously considered uninsurable may now fall within underwriting appetite, potentially increasing W&I/R&W policy activity.

Pricing and coverage

Throughout 2024 and into 2025, the soft market conditions persisted across most regions, with underwriting fee reductions, competitive premiums, and broad coverage options continuing to define the transactional risk insurance landscape. Insurers remained aggressive in a still-recovering M&A environment, especially on smaller deals, while some regions began to show early signs of rate hardening.

Key highlights

Underwriting fees

Fee reductions and waivers returned, particularly on smaller deals where external counsel was not used.

Global pricing trends

UK and EEA: Rates remained below 1% for operational targets (as low as 0.65%), and 0.45% for real estate.
India: Rates around 1.5%, reflecting growing market confidence.
Australia and South Africa: Increased capacity drove premiums downward.
US and Asia: Rates held steady; US averaged mid-2.0% range.

France: Pricing pressure due to low deal flow and new capacity.
CEE (energy and tech): Slight rate hardening amid overall stability.
Israel: Significant drop in rates (1.9%–2.4%) as more insurers entered.
Latin America: Rates ranged 2.3%–3.9%, soft locally but above global average.

Key highlights

Coverage trends:

Liberal underwriting continues; broader coverage for environmental, insurance, and asset warranties.
Creative policy drafting helps narrow exclusions, driven by strong competition.
Some insurers now require deeper financial diligence due to high claims linked to financial warranties.
Buyers remain in a strong position to leverage insurer competition, especially from newer entrants.

Synthetic warranty coverage on the rise

Record demand: the past 18 months saw more requests for synthetic warranty cover than ever before, as sellers leverage insurer confidence and buyers seek alternative protections.
Broader coverage suites: insurers are increasingly willing to underwrite extensive synthetic warranties, beyond limited standard sets, provided sufficient disclosure and due diligence.
Complex transactions enabled: synthetic cover helps bridge gaps when sellers cannot or will not provide warranties, supporting innovative deal structures.
Continued growth expected: despite higher costs, the trend toward full or partial synthetic warranty coverage has persisted throughout 2025 is expected to continue and beyond.

“US style” cover

Increased usage in Rest of World: there has been a noticeable shift from certain “US style enhancements” being offered as bolt-ons to Rest of World policies to insurers being willing to provide the whole suite of “US style enhancements” more regularly.
Driven by US investment into Europe: the increase in US participation in European M&A has helped encourage this shift, accompanied by client’s insurance budgets being able to stretch further given the low rates.

Limits of Liability

Limits of liability and use of supplemental title insurance remained largely consistent since 2024, with some regional variation driven by pricing and market dynamics. Insurers continued to structure large policies through towers, while shifts in the title insurance market led to new product development and pricing adjustments.

Key highlights:

Limits of liability:

Typically ranged between 10%–30% of enterprise value, remaining consistent with previous years.
France and South Africa: Higher limits taken out due to reduced premiums.
Continued use of tower structures to deploy insurer capacity, especially for tax risks.
In Central and Eastern Europe, high limits were sought for targets in regulated sectors.

Title insurance:

Growing use of title top-up policies to supplement fundamental warranty cover.
Title insurance market remains tightened after a $1bn+ claim in late 2023.
Traditional title insurers lowered capacity, prompting W&I insurers to fill the gap.
Rates for title cover rose from ~0.1% to ~0.3% due to binder restrictions.
In response, W&I insurers began launching their own title products, helping rates stabilise and boosting uptake.

Retention levels

In a bid to remain competitive, W&I insurance markets increasingly began
to offer nil and tipping retention options, even for more complex deals. This trend is expected to continue throughout the remainder of 2025 and into 2026.

Key highlights:

Western Europe:

Nil retentions are common for real estate, renewables, and simpler operational targets.
Also seen on domestic operational deals, often paired with higher de minimis for employment warranties or low fixed retentions.
Nil retention for fundamental warranties are now standard across the board.

Global trends:

Tipping retentions are becoming market standard globally.
Latin America & India: Retentions typically 0.30%–0.75% of EV, often with tipping structures.
US: Tipping retentions remain common, building on already buyer-friendly policy terms.

Insurance due diligence

In addition to better understanding the scope of a target’s existing insurance policies, which can facilitate post-acquisition integration, client interest in insurance due diligence surged over the past 18 months as both buyers and sellers increasingly recognize its importance in securing comprehensive W&I/R&W coverage. A thorough review of a target’s existing insurance policies is now essential to support warranties related to those policies and to manage escalating insurance risks.

Key points:

Increased client demand for insurance
due diligence to identify coverage gaps and support W&I/R&W warranties.
Due diligence on underlying insurance (e.g., cyber, D&O, property) is required for related warranties to be covered.
Growing insurance losses and risks make due diligence critical for broader transactional risk coverage.
Insurance due diligence enhances deal teams’ management of legacy risks.
Volume of vendor insurance due diligence mandates serves as an early market sentiment indicator, typically commissioned 3–6 months before sale processes start.

Underwriting themes and competitive differentiation

Crowded market dynamics: With similar
coverage and low pricing, underwriters
highlight their experience and claims
handling to stand out.

Process improvements: Insurers
showcase sector expertise, claims track
records, and streamline underwriting
questions to improve client experience.

Claims handling expectations: Though W&I/R&W insurance offers financial recourse, claims investigations can take time; expect insurers in
2026 to commit to faster claims resolution timelines to gain a competitive advantage.

Broker value: Experienced brokers like WTW play a vital role in maximising insurance benefits and facilitating a smooth insurance process (from placement through to claims).