W&I Insurance in Germany: A More Active Claims Market

As warranty and indemnity (“W&I”) insurance has become a market standard for securing clean exits and a core element of transaction risk allocation, claims are now being notified more frequently, earlier in the policy period and, in relevant cases, at materially higher values than during the soft-market phase. This reflects a market in which insureds and their advisers are more familiar with the product and use it more actively after closing. At the same time, insurers are assessing claims with greater discipline, and focusing closely on the underlying facts, the diligence record and the policy wording.

A More Active Claims Environment

Recently published 2026 claims reports point to a marked increase in notification activity across Europe, with Germany accounting for a substantial proportion of reported claims.

One report recorded 240 new notifications in the relevant period within Europe [1], almost double the level seen in the previous year, while another reported a year-on-year increase of nearly 50% across EMEA [2]. The same reports further indicate that claims are being notified earlier in the policy period, with approximately half of European claims being notified within the first year and approximately 78% within 24 months after inception. [3]

Against this background, W&I insurance should no longer be treated as a late-stage procurement exercise. It should instead be integrated into the transaction structure from the outset and aligned with the SPA, the diligence process, the disclosure exercise and the definition of the buyer’s knowledge. Absent such coordination, the policy and the SPA may address different risks, with the resulting misalignment often becoming apparent only once a claim is pursued.

Frequency Is Rising, but Severity Remains Concentrated

The defining feature of the current market is not only the increase in notifications, but also the continued concentration of meaningful losses in a limited number of warranty categories.

Tax warranties remain the most frequent source of notifications across Europe, often triggered on a precautionary basis, for example in response to audits or regulatory enquiries. According to these reports, however, such claims do not often lead to substantial payments. By contrast, breaches of financial statement warranties continue to account for the largest paid losses in both reports and, in one of them, represented a significant share, namely approximately 64%, of aggregate paid amounts in Europe. [4]

That is nevertheless commercially unsurprising, as accounting misstatements have the potential to affect EBITDA, working capital, indebtedness and, consequently, the assumptions on which the purchase price is based. Where loss is measured by reference to diminished share value or a multiple-based methodology, even relatively limited accounting issues may give rise to substantial claims. This therefore remains the defining feature of loss severity in the W&I market.

Implications for Deal Practice

1. Both the SPA and the W&I policy should be treated as a single, coherent framework. Accordingly, warranty wording, qualifiers, disclosures and loss concepts must align with the scope of insured cover and be drafted with sufficient clarity in both documents.
    
2. The distinction between known and unknown risks likewise remains fundamental. W&I insurance is not intended to cover issues identified in diligence or otherwise falling within the buyer's knowledge. Such issues require separate structuring, whether through indemnities, pricing mechanisms or targeted solutions. In practice, however, this continues to generate tension, particularly where parties may be tempted to place difficult issues in the grey area between disclosure and insurable unknown risk.
    
3. Financial diligence remains central. Revenue recognition, receivables, provisioning and accounting controls have repeatedly been identified as recurring sources of loss. Diligence must therefore not only identify risks, but also establish a coherent evidential basis for underwriting and, where necessary, for a subsequent claim.
    
4. Notification strategy and claims management have also become more important. Early notification is often prudent, including before loss has fully crystallised or where the amount appears likely to be lower than the retention. At the same time, claims should be prepared as substantive submissions, supported by well-founded legal and financial analysis and a strong evidential record. That materially improves the prospects of an efficient recovery.

A Product That Continues to Deliver

The current claims environment does not diminish the role of W&I insurance. Rather, it demonstrates that the product is being used as intended, with recoveries achieved across jurisdictions and across a range of claim sizes. It remains an effective response to the limitations of traditional post-closing recourse, particularly where sellers require a clean exit and buyers seek a solvent and contractually defined route to recovery.

What has changed is the level of preparation required to achieve that outcome. In a more active and exacting market, successful recovery increasingly depends on the quality of diligence, the precision of drafting and the effectiveness of claims handling. W&I insurance should therefore be embedded throughout the transaction process, from the diligence phase and SPA drafting through to closing and, where necessary, the pursuit of claims.

[1] Marsh, Global Transactional Risk Insurance Claims Report 2026, at 21 et seq.

[2] Aon, 2026 Transaction Solutions Global Claims Study, at 4; 35 et seq.

[3] Marsh (n 1), at 21 and 24; see also Aon (n 2), at 35 and 37 f.

[4] Marsh (n 1), at 25 f.; see also Aon (n 2), at 41 f.