Underwrite at first sight? Not quite

Warranty and indemnity (W&I) insurance now forms a core part of private M&A transactions and private M&A sale processes. In our DealTrends analysis of 103 private M&A control transactions in FY24 and FY25 with an Australian nexus, 79.2% of deals over A$100 million and 55.6% of deals under A$100 million utilised W&I insurance. In the Asian market, the number of W&I insured deals has also experienced year-on-year growth across all valuation brackets. 

Drawing on our experience acting for Buyers, Sellers and W&I insurers, here are the top trends we’re seeing in the use of W&I insurance in private M&A transactions in Australia and Asia and what they mean in practice.

Commerciality is key

The use of W&I insurance is driving more commercial and efficient underwriting processes:

• Fewer underwriting calls are required, with insurers increasingly comfortable relying on written responses. Where calls are used, they are shorter and more targeted.
• Deal timelines, and in turn W&I timetables, are being compressed. Requests for W&I insurers to match accelerated deal timelines are increasing, and we have seen some underwriting processes getting completed in less than a week (albeit with a number of matters agreed to be dealt with post-signing).
• Buyers and Sellers are pushing W&I insurers to provide more coverage certainty on policies before commencing underwriting. W&I insurers are being requested to:
  • focus on the most commercially material issues when it comes to their coverage positions; and
  • provide fewer ‘standard’ exclusions to coverage, or at least better guidance from W&I insurers on what due diligence is required (e.g. the scope of payroll sampling) for coverage to be provided.

Sell-side ‘flips’ and requests for multiple ‘trees’

Buyers and Sellers are using W&I more strategically in competitive sale processes.

On the sell-side, there is greater usage of seller-driven pre-bid processes, with a broker appointed along with a recommended W&I insurer to provide initial underwriting views to bidders, including where further due diligence is expected for specific coverage positions (eg. specialist IT or cyber due diligence for a tech-heavy business, where wide-ranging tech warranties are expected). This then subsequently ‘flips’ to the buy-side, with the W&I insurer having already pre-underwritten the deal, which can shorten the W&I timetable and provide greater certainty on policy coverage outcomes (and accordingly, recoverability for breaches of warranties).

On the buy-side, there are now more requests for multiple bid ‘trees’, where bidders engage with brokers and W&I insurers before binding bids are submitted or final bidders selected. This allows bidders to receive a view on coverage positions (particularly the scope of warranties) before they submit their bids, and to focus negotiation efforts on other commercial priorities such as price/valuation and specific indemnities.

New market entrants

The push for commerciality and strategic usage of W&I has aligned with new entrants to the W&I insurance market in Australia and Asia over the last few years. Managing General Agents with established presence in the UK / Europe and the US (such as Ryan, VALE, Riskpoint, DUAL, Mosaic and Euclid) have entered Asia-Pacific markets, along with insurers such as QBE in Asia.

The wider range of insurer options for Buyers and Sellers has accompanied improved pricing and coverage, notwithstanding:

• increase in APAC claims: Marsh’s 2025 Global Claims report noted a significant increase in claim notifications in the Asia-Pacific in 2024, led by claims notifications from Australia and New Zealand and the majority of claims being for tax breaches and financial statements breaches (in line with global trends). Severity of losses claimed also rose, with 60% of claims notified in 2024 expected to breach retention thresholds (23% in 2023) and large losses exceeding USD10 million increasing in frequency; and
• recent case law, which reiterates the need for fair and targeted data room disclosure (rather than the blanket upload of documents to a data room) in order for the contents of a data room to qualify warranties.[1]

Wider jurisdictional coverage

W&I insurers are now more comfortable providing coverage in more jurisdictions across Asia and providing ‘tiered’ or ‘blind spot’ jurisdictional coverage.

Other than countries subject to sanctions or which are particularly high-risk (such as North Korea and Myanmar), multiple W&I insurers are now able to provide jurisdictional coverage for most countries across Asia. The limitation is usually regulatory - where local regulations require a locally registered insurer to write the policy - rather than commercial, and insurers are also making use of ‘fronting’ arrangements to better align commercial approaches with regulatory requirements.

Insurers are also increasingly comfortable with a ‘tiered’ approach to due diligence addressing different jurisdictional and operational risks. The highest-risk or most material jurisdictions (by way of revenue, operations etc.) require the most detailed diligence, while lower tier jurisdictions require less detailed diligence but still secure comparable coverage positions. In some situations, insurers can even provide ‘blind spot coverage’, covering jurisdictions with no due diligence other than for ownership of the relevant companies.

Growth of bespoke policies

Bespoke insurance policies and products, particularly in the tax space, are growing in use to cover gaps and areas which are usually carved out of W&I policies or to extend coverage.

In the tax space, this commonly includes matters such as the availability of carry forward tax losses and transfer pricing. Recently, we have seen specific tax policies expand into a broader range of technical taxation issues, including the income tax characterisation of trusts (eg. whether trusts had been correctly characterised as Managed Investment Trusts or should have been classified as trading trusts), payroll tax, general anti-avoidance rules and the application of landholder duty on share acquisitions. We expect to see the range of topics addressed under these bespoke tax policies continue to grow as the Asia-Pacific market becomes more familiar with these policies and their benefits. 

In the corporate space, this has included title policies in which specific W&I insurer(s) (which can differ from the insurers writing the full suite of sale agreement warranties) write policies in respect of title and capacity warranties only to provide financial protection beyond the policy limits in the main W&I policy.