Hunton Insurance Recovery Blog

Corporate transactions are on the rise. A recent report by Aon reveals that between 2024 and 2025, the average deal value for its North American clients increased by 73 percent. Deals exceeding $1 billion in value increased 26 percent. This growth points to a healthy transactional market and increased deal activity, creating meaningful opportunities for businesses and investors to pursue strategic acquisitions. 

But with increased dealmaking comes increased risk. No matter how carefully diligence is conducted, not every risk can be caught by closing. Issues such as poor bookkeeping, undisclosed problems in key customer or supplier contracts, and lurking compliance issues may surface only in post-closing audits or investigations. The threat of downstream risk can impede negotiations, especially because deals are getting bigger and bigger.

One solution is transactional risk insurance. Products like representations and warranties insurance target specific risks in corporate transactions that may be overlooked or difficult to investigate, giving transacting parties comfort that these risks will not result in unexpected costs down the road.

A recent report by Aon suggests that transactional risk insurance bears out its cost. In 2025, Aon’s North American clients recovered more than $1 billion across transaction solutions claims, including more than $440 million on reps and warranties claims alone. The median reps and warranties payment reached a record high—$8.2 million—and the average payment even higher, about $10.4 million. And although the number of claims on reps and warranties policies has remained relatively steady, payouts per claim are increasing, suggesting risks are becoming costlier.

The report underscores how difficult it can be to detect risks during the diligence process. Just over half of reps and warranties claims were notified more than a year after closing. Nearly $700 million of Aon’s $3 billion total transaction solutions recovery in 2025 was attributed to claims noticed more than a year after closing. Aon also flagged certain types of losses particularly likely to be uncovered long after closing; among them were legal compliance, tax, and financial statements issues. Often, these types of losses are triggered by third-party events such as audits or class actions outside the buyer’s control. Thus, many of the most consequential problems do not reveal themselves during the customary escrow period.

Aon’s report breaks down by category claims made under client transactional risk insurance policies:

• Financial statements claims—involving breach of representations made about a company’s financial status—are the biggest category of paid loss in North America. They account for 38 percent of paid losses on policies placed since 2019.
• Material contracts claims—involving breach of representations made about a company’s key contracts^[1] partners—are next at 21 percent.
• Compliance with laws claims—involving breach of representations made about legal compliance—make up 15.1 percent of claims.
• Finally, intellectual property claims—involving breach of representations about intellectual property rights—make up 11 percent of claims.

Financial statements claims are particularly interesting because they represent several types of risk. Aon found that the single greatest driver of loss was improper revenue recognition, meaning allocating revenue incorrectly or recording revenue before the company had actually incurred it. This risk is particularly difficult to assess—and therefore manage—at closing because it often turns on accounting judgments and recurring earnings assumptions that may look acceptable in diligence but unravel after a post-close review of accruals, receivables, and other financial data. Reps and warranties insurance is therefore an important tool to reduce this risk. Other financial statements claims include improper accounting controls (e.g., inaccurately calculating operating expenses or misclassifying liabilities as assets) and accounts receivable issues. 

Also notable are compliance with laws claims, which make up 23 percent of claims noticed more than 12 months after closing. They often function as a catch-all category for legal and regulatory problems that may not fit neatly elsewhere. These claims are similarly difficult to evaluate at closing because they often depend on actions of third parties—such as audits, investigations, and class action complaints—and thus cannot be fully investigated before the deal closes.  Aon points to wage and hour claims, public and consumer protection violations, and antitrust investigations as common fact patterns. Of those, Aon notes that the most severe losses are often linked to infrequent, but highly damaging, Department of Justice antitrust matters.

In addition to reps and warranties insurance, the report touches on tax insurance policies (addressing risks based on defensible, but not invulnerable, tax positions). Though fewer tax policies result in a claim—Aon says that less than ten percent of its clients’ tax insurance policies have had a claim and less than two percent have paid out on any loss—claims that are filed can be huge. In 2025, Aon’s North American clients recovered more than $350 million under tax insurance policies, including seven-, eight-, and nine-figure payments. These sums include reimbursements for costs to contest tax determinations, settlements reached with the tax authorities, and amounts the tax authorities successfully asserted were due.

As dealmaking continues to accelerate, the central lesson from Aon’s report is that transactional risks do not end at signing, or even at closing. Some of the most meaningful issues involved in a transaction may come into focus only after the buyer has begun integrating the business or responding to governmental scrutiny. Against that backdrop, transactional risk insurance is a practical way to protect deal value and smooth negotiations when diligence cannot fully eliminate uncertainty. Ultimately, in a market defined by larger and more complex transactions, well-structured coverage has become an important part of thoughtful dealmaking.

^[1] Key contracts are agreements so central to a transaction or business relationship that their terms are critical to the parties’ obligations, rights, and risk allocation.  Examples include major customer contracts, supplier agreements, and service or licensing agreements.