29 September 2026
Tim Allen (Head of Global M&A, Beazley) opened the LMA’s first Transactional Liability Interest Group event, explaining that it was organised in response to capacity providers seeking practical insight, shared experiences and a clearer view of developments in the transactional liability market. The session brought together underwriters, claims practitioners and legal advisers from the United Kingdom and United States and was designed as an interactive discussion followed by audience questions.
The panel included:
The discussion examined who brings claims, what is being claimed, when claims develop and resolve, where claims arise, why the market is changing and how claims are investigated and managed.
The speakers described a market experiencing capacity reductions, withdrawals by some participants and losses that were challenging certain insurers. The event was intended to share practical experience whilst acknowledging the value and longevity of the product, with the panellists presenting their experiences dealing with claims on a day-to-day basis.
Notifications were described as broadly balanced between strategic buyers and private equity. The panel linked the increase in claims activity partly to broader or different coverage and to the greater ease with which insureds can identify and notify potentially valid claims.
Buyers, lawyers and brokers were said to have become more sophisticated over the previous decade. Claims are now generally presented with more structured material, and brokers are more familiar with the notification and adjustment process.
Private equity claimants in the United States were described as potentially more experienced and flexible because they may be repeat buyers familiar with the product and the claims process.
The panel emphasized the importance of brokers managing expectations about the scope of cover, the likely duration of the process and the level of recovery that can reasonably be expected. Brokers who understood the product were seen as able to reduce unrealistic expectations among insureds and clients.
Lawyers for insureds were described as increasingly knowledgeable about the product, but the transition from deal teams to litigation teams can still produce an overly adversarial approach. Examples included claim notices framed as pre-action correspondence, threats to issue proceedings within 30 days and requests for payment in full at the outset.
Several speakers argued that claims should be handled more collaboratively. They considered that unnecessary information requests, excessive outsourcing and the appointment of lawyers without appropriate transactional liability experience can lengthen the process and undermine trust.
The panel discussed differences between the United States and the United Kingdom in the handling of claims across insurance towers. In some matters, multiple firms or carriers undertake substantially similar work even though their interests are aligned. The speakers questioned whether this duplication adds value, while recognising that separate representation may sometimes be justified for strategic or commercial reasons.
Information sharing across towers was presented as an area where the market could improve. Better sharing could provide earlier visibility of developing claims, support more consistent investigations and help higher excess layers set appropriate reserves. The speakers noted that sharing practices vary by territory, with more sharing generally perceived in London than in the United States.
The panel also supported using shared financial experts where possible, particularly for complex quantum issues. Experts can compare calculations directly and reduce duplicated costs, although the speakers acknowledged that expert involvement does not always resolve disagreements.
A recurring concern was that insureds may submit a claimed amount without demonstrating how the loss has been calculated. The panel considered that financial experts can help establish whether a claimed amount is supported and can enable the parties to work through the insured’s affirmative case more efficiently.
The speakers also stressed the importance of appointing suitable counsel. In third-party demands, insurers may not control the appointment of defence counsel and may have to work with lawyers who lack experience in the relevant underlying liability issues. Early cooperation can allow insurers to share relevant experience and recommend counsel capable of producing a sound result.
Financial statement claims remained the principal source of severity in the panel’s experience. Material customer claims also remained important. The panel reported a substantial increase in tax notifications and third-party claims, particularly in the United States, although tax notifications were said to be more numerous than necessarily severe.
The panel also discussed claims involving material contracts, tax, undisclosed liabilities and judgment preservation insurance. In the United States, third-party claims may require defence costs to be funded early and can create a prolonged adjustment process.
The speakers linked increasing claim frequency and severity partly to changes in policy coverage rather than solely to changes in the underlying representations. They referred to the removal of materiality and knowledge requirements, lower retentions, synthetic coverage and other policy mechanisms that may permit recovery in circumstances where the buyer could not previously have pursued the sellers directly.
Disclosure exclusions were identified as a particularly active area. The fact that an issue was disclosed may not always necessarily resolve whether the specific matter, its consequences or its financial scale were adequately disclosed. This creates recurring disputes about the scope of the disclosure and the operation of exclusions.
The panel also noted that claims notifications sometimes assert that the breach and loss are so large that the policy limit must be exhausted. Such a presentation does not remove the need for insurers to undertake an investigation, and insurers may accept that a breach exists while disputing the scale of the loss, especially where the supporting material does not substantiate the amount claimed.
Investigation and prosecution costs were described as increasingly significant, particularly in the United States. The panel warned that these costs can be disproportionate to the covered loss and may continue to accumulate even where only a small part of the underlying claim is covered. Clear drafting is therefore important in determining whether investigation costs are covered and how they interact with prosecution-cost provisions.
Subrogation was described as becoming a more active consideration. Panellists reported that matters once discussed but not pursued are increasingly being investigated or advanced, including potential fraud claims against sellers. This shift was associated with sellers having little or no residual liability, the widespread knowledge that transactional liability insurance has been purchased and concerns that diligence and disclosure may receive less attention when insurance is expected to respond.
The speakers stressed that TL policies were not intended to protect against a bad deal or replace proper diligence. They considered it important to pursue viable recovery actions so that the product does not create an incentive for inadequate diligence or disclosure. At the same time, subrogation can be expensive and difficult because insurers may disagree about the amount of the underlying loss, participation in litigation and whether the expected recovery justifies the cost.
The panel also considered potential fraud where a serious error occurs shortly before closing and the seller may have benefited from it. Even without a clear ‘smoking gun’, the speakers said that such circumstances warrant investigation into the cause of the event and any seller involvement.
For tower recoveries, the traditional expectation was that recoveries would be applied from the top down, whereas claims are generally paid from the bottom up. Participants suggested that any alternative allocation would require advance agreement because pursuing subrogation involves significant shared costs.
Most claims were said to be notified within approximately two and a half years of closing, although third-party and tax matters may arise later because their timing is controlled by external parties. The duration of adjustment depends on the claim’s complexity, the parties’ engagement, the number and conduct of advisers, and the extent to which the insured’s internal personnel participate.
The panel described long-tail matters that remained open for many years. Examples included a matter dating from 2015, a 2017 arbitration between buyer and seller where the buyer reserved rights to pursue insurance after the arbitration concludes and a 2022 claim that remained open after repeated periods of silence and intermittent correspondence. Some files remained open not because of active disagreement over adjustment, but because the insured continued to reserve the right to report or pursue a claim without progressing it.
Reserving practices vary between carriers, but the speakers encouraged claims teams to reserve when the available information supports a reasonable assessment rather than waiting for the final loss figure. Actuaries, reinsurers, underwriters and other market participants should receive regular updates so that developing losses do not come as a surprise.
The panel perceived a positive trend toward earlier and more focused notifications. Participants reported fewer last-minute notifications containing numerous speculative circumstances and more notices identifying a particular issue with a clearer justification.
The broad distinction between higher claim frequency in the United States and lower frequency elsewhere was said to remain generally accurate, although the rest of the world is narrowing the gap in severity. The United States continued to generate the most severe claims, while panellists reported increasing financial statement and material customer claims outside the United States and more claims involving multiples.
The discussion also identified activity in India and the wider subcontinent, Eastern Europe, Poland, Singapore and other jurisdictions. Reported issues included tax matters and regulatory matters, although the speakers cautioned that some apparent geographic trends may reflect the particular work seen by the advisers rather than a definitive jurisdiction-wide pattern.
The panel offered several connected explanations for current market pressure:
Overall, the panel’s discussion portrayed a valuable, maturing product whose claims environment is being shaped by broader coverage, more sophisticated participants, increasing use of experts and advisers, greater attention to recovery and a market that is adjusting to its first substantial cycle of loss experience. The event concluded with audience questions on tax claims, subrogation, tower recoveries, information sharing and reserves.