Claims severity and premium pricing pressures
Warranty and indemnity insurance has paid out more than it can sustainably afford, according to Euclid Transactional’s fourth annual Global W&I Claims Study. Across 8,502 transactions since 2016, carriers have paid US$1.686 billion in claims. The most recent 12-month period recorded 255 claim payments totalling US$518 million, representing a 44% increase in aggregate loss paid compared to the prior period. Payments of US$20 million or more accounted for 54% of all loss paid in the latest period, compared to 40% previously. This surge in severity coincided with sharp rate declines between 2022 and 2024 across North America and EMEA, alongside falling policy retentions, rendering policies written in 2023 and 2024 largely unprofitable and prompting some carrier exits.
EMEA claims performance and market correction
In EMEA, claim notices grew from 20 in 2019 to 222 in the study's most recent 12-month period, while loss paid rose 59%. Tax warranty breaches represented the most commonly notified claim type in EMEA at 8% of total loss paid, whereas financial statements claims accounted for 13% of notices but drove 58% of total EMEA loss paid. Nearly 90% of Euclid's loss paid arose from claims exceeding 1% of enterprise value. With market rates recovering from 2024 lows, the study indicates that sustainable future pricing must track individual deal risk profiles rather than overall market volume.