As the mergers and acquisitions market heats up, more companies are buying insurance against post-transaction snags, according to a report by Marsh Risk.
The broker placed more than 1,800 representations and warranties policies in North America in 2025, up 32% from 2024, it reported Thursday. Total placement limits grew by 23%.
Average reps and warranties policy premiums are up 16% year-over-year, after three years of decline. Marsh Risk said the rate hikes reflect claim frequency and severity.
Claim payouts to Marsh clients have risen steadily to $413 million in 2025. Financial misstatements accounted for the largest share of reps and warranties claims at 26%, with legal compliance problems, tax liabilities and litigation running behind.
Reps and warranties, the most common type of transactional risk insurance, protects against financial loss stemming from breaches of representations and warranties in a purchase agreement.
Insurance against unforeseen tax liabilities is also growing, according to the report. Marsh Risk placed 82% more tax insurance policies in North America in 2025 than in 2024. Insurance against tax liabilities is prevalent in renewable energy due to the key role of tax credits. Other companies bought policies due to uncertainties stemming from last year’s tax policy changes in the U.S., it said.
North American M&A activity surged last year to a record $3 trillion in 2025, a 52% increase over the year prior, according to data company Pitchbook.
About 15% of deals covered by reps and warranties eventually result in a claim, according to a June 2025 Aon study.
Nearly two-thirds of private deals utilized reps and warranties, according to a study by the American Bar Association covering transactions closing in 2024 and early 2025.