M&A Market trends Q1
As set out in the Willis Quarterly Deal Performance Monitor Q4 2025, the global mergers and acquisitions market showed a significant resurgence in 2025, marking its second consecutive year of increased activity. We have seen this increase in deal activity continue in Q1 2026 with a 42% rise in the number of policies placed compared to Q1 2025.
Our most active sectors this quarter have been, TMT, renewable energy and manufacturing, each of which has seen sustained deal flow and strong underwriting appetite.
Against the backdrop of the broader geopolitical environment, we have seen an increase in deal activity in the defence sector. Insurer appetite for the sector has expanded, a trend we expect to see continue.
US inbound investment into the UK continues to be a trend we are seeing in 2026. Hybrid policies, either a full US style Representations and Warranties Insurance (RWI) policy on a European transaction or a Warranty and Indemnity (W&I) policy with US style enhancements, are becoming more popular with US buyers often preferring the scope of cover and the familiarity of policy form afforded by a RWI policy. A limited, but increasing, number of insurers are now able to offer full US style RWI policies for European transactions.
Tax Liability Insurance Case Study: Carried Forward Losses
A client was acquiring an oil production company which had large amounts of carried forward losses. The intention was to undertake a post acquisition reorganisation which would have transferred profitable oil producing assets into the Target. The carried forward losses of the Target would then have been utilised to offset the profits from the oil producing assets.
The risk was the UK tax authority could seek to argue that the acquisition of the Target resulted in the losses being forfeited, as a result of a major change in the nature or conduct of the trade a (MCINOCOT). The rate on line for the policy was 2.3%.
Insurance covered any tax, interest and penalties arising as a result of the carried forward losses being disregarded.
In this case the Target has several billion of carried forward losses so represented a huge amount of value.
Insurance provided sufficient certainty to the Buyer such that they could attribute value to the carried forward losses, enabling Buyer and Seller to reach agreement on the Target’s valuation.
W&I Insurance Case Study
A notable highlight this quarter includes our appointment to place W&I insurance in connection with a significant acquisition in the wealth management sector.
The client requested a W&I policy with additional cover for fundamental warranties (also known as fundamental warranty ‘top-up’ cover). Our deal experience and strong relationships with the insurance market allowed us to stretch underwriters’ initial limit offerings and build a tower of insurance with highly competitive pricing, achieving an aggregate limit of approx. £1 billion.
At the point the client entered exclusivity, Willis had only 3 days to negotiate and finalise the W&I primary and excess policies. Notwithstanding the compressed timetable, we successfully bound the full tower ahead of the signing of the acquisition agreement.
Post-signing the client has been able to further improve the W&I policy coverage by lifting exclusions through endorsement supported by additional due diligence undertaken post-signing.
Claims
Willis is continuing to see a rise in claims though such rise being commensurate with the increase in policies being placed.
Our Claims Analysis R&W/W&I Report 2026 shows that, of the W&I claims analysed, 82% of claims are discovered and notified to insurers within 2 years of the SPA date. This nevertheless leaves almost one‑fifth of claims arising outside that period, an important consideration for insureds when determining appropriate policy periods.
The report also confirms that claims arising out of breaches of tax warranties account for the largest proportion of W&I claim notifications with breaches of financial statements representing the largest incurred losses. This is consistent with claims data observed in prior years.
If you would like a copy of our Claims Analysis R&W/W&I Report 2026, please contact your usual Willis M&A contact or the contacts listed on this update.
Reflecting the importance of delivering a positive claims experience for our clients, we have further strengthened our claims capability with the appointment of Tom Pemberton - Head of W&I claims - International ex NA.
Contacts
