1. Introduction

The UK and European M&A markets continue to demonstrate resilience, even as the wider environment remains defined by uncertainty. Deal activity is being driven by increasingly selective buyers, focussed on strong-value creation opportunities underpinned by a well-mitigated approach to downside risk.

It reflects a broader backdrop, amongst other factors, of inflationary pressures, supply chain and energy fragility, and the revolution of artificial intelligence technologies. At the same time, ongoing global conflicts are reshaping the economic landscape, and with it, the risk profile of transactions across Europe. Uncertainty on interest rates, tighter credit conditions and refinancing pressures have also influenced the pace and structure of deal activity. For many market participants, this has reinforced the need for solutions that can maintain momentum without compromising on protection. This is especially true where competitive tension, compressed timetables or heightened diligence requirements increase pressure on execution. At the same time, regulatory scrutiny across competition, foreign investment and sector-specific approvals is adding further complexity, particularly in cross-border or strategically sensitive transactions.

In this context, there continues to be positive opportunities for strategic deal-making, although parties are seeking greater certainty in deal execution and delivery. Increasingly, when utilised alongside other strategic levers, W&I insurance is now considered to be a crucial enabling tool in supporting parties through to deal completion. Rather than simply a point of negotiation in the final stages of a process, W&I insurance often now features as a material factor in how bids are structured, risks are allocated and commercial discussions settled.

2. Role of W&I Insurance

W&I insurance is a risk-transfer tool designed to respond to breaches of seller or management warranties and tax indemnities under a share or asset purchase agreement. W&I offers buyers a smoother and less-contentious path to recovery than exercising traditional recourse rights against the sellers. While historically policies could be structured through either buy-side or sell-side cover, the EMEA market is now almost exclusively buy-side policies with little direct engagement between sellers and the insurer. However, the process and policy remains largely dependent on the sellers undertaking a robust disclosure exercise against the warranties, and this will be a key area of focus for insurers throughout W&I processes. Accordingly, the quality of disclosure and balance of the warranty schedule remain central to insurer comfort and can materially influence both pricing and coverage outcomes.

By essentially stepping into the shoes of the seller for a covered warranty breach, the true value of the W&I product lies not only in meaningful post-completion protection, but also in the efficiency and reduced deal friction it brings to processes.

The W&I product has matured significantly in both the UK and European M&A markets. Historically regarded as specialist tool for private equity exits, W&I is now a familiar feature of private and corporate M&A alike and is widely used to facilitate deals ranging from small and mid-market sales to marquee transactions or corporate carve-outs. As experience with the product grows, advisers and insurers are finding new ways to meet the challenges of the current environment with tailored and innovative solutions. When most effectively implemented, W&I policies sit within the broader context of a thoroughly diligenced and well-negotiated transaction. As attractive assets become subject to more competitive sales, W&I will continue to play a critical role. In practice, this means not only supporting clean exits for sellers, but also helping buyers bridge areas of uncertainty where escrow solutions are commercially unattractive.

3. W&I in a market shaped by global factors

At a time when buyers and lenders are assessing a myriad of macroeconomic factors, there is a notable shift in transaction behaviour. Inflationary pressures remain a persistent consideration for buyers, who are assessing the potential impacts on financing conditions, valuation assumptions and consumer-behaviour. Simultaneously, geopolitical developments have added further complexity on issues or energy security and pricing, supply chain disruption and exposure to regions in conflict.

Questions of operational resilience in the face of these challenges are no longer peripheral diligence considerations, but instead go to the heart of business operations and the transaction value. The tangible impact has been a shift towards physical-asset heavy transactions, where there is a strong and stable anchor of core value1. As artificial intelligence technologies continue their expansion, the ancillary infrastructure required to support this is also driving demand for investment. This is reflected in increased activity and valuations in data centres, power assets, logistic platforms and other industrial facilities.

Another key trend that has been a hallmark of recent European M&A, has been the acceleration in defence and military technology investment. Analysis suggests that total deal value in the European defence sector increased by over 200% from 2024 to 2025,2 with NATO countries in Europe expected to commit an additional 300 billion euros by 2030.

Traditionally, assets of this nature are associated with long-tail risk considerations and diligence which reflects that. The transactions themselves are subject to increasingly complex and robust regulatory requirements and filings. As a result, transaction timelines can be lengthy, and many processes are paused or abandoned altogether. In these scenarios, W&I insurance can be crucial in preserving momentum, particularly on issues of risk-allocation. By agreeing a commercially appropriate insurance programme, parties can shift their focus from post-completion exposures to other deal challenges, with buyers and lenders safe in the knowledge that value is nonetheless protected. This is especially valuable where sellers are unwilling to retain any significant liability, or where a competitive process requires a clean and efficient allocation of risk.

However, to achieve this, the interaction between diligence and the W&I underwriting process becomes critical. The effectiveness of the insurance solution is closely correlated to the quality and scope of the underlying diligence exercise. Insurers will seek to gain comfort that key areas of risk have been appropriately reviewed, and core valuation assumptions have adequately stress-tested. Rather than replacing robust diligence, W&I policies operate alongside it to provide additional layers of protection.

In a complex and fast-changing environment, open and early engagement with W&I insurers on scoping and key coverage points can allow all parties involved to move into the underwriting process with certainty and efficiency. In an active W&I market, the value of the product must be grounded in buyer confidence in the claims record and process-handling of sophisticated and trusted insurance partners. This should play a critical role in the selection process of the W&I insurer.

4. Market Outlook and Key Insurance Trends

Insurers themselves are not immune from the larger economic factors at play. From an underwriting perspective, that is likely to result in a combination of greater underwriting sophistication, deal selectivity and pricing which is reflective of the increased and evolving risks to Insurers.

W&I insurers will still seek to support clients operating in more exposed sectors and jurisdictions, although there will inevitably be a recalibration in approach. Going forward, an increased focus should be expected on how parties identify, disclose and mitigate the risks associated with increased uncertainty, and there will be an appetite from Insurers to see appropriate valuation assessments of these factors.

That can be achieved through multi-disciplinary approaches to diligence which reflects the key commercial risks. In parallel to that, other tools including deferred consideration arrangements, price adjustments and counter-party engagements create a layered approach to deal-structuring which diversifies potential investment downside. Instead of reliance on one element of deal-protection, parties are seeking to combine commercial, legal and insurance solutions in a way that supports execution while preserving value. This trend also reinforces the importance of early broker and insurer engagement, particularly where transaction timetables are compressed or the underlying asset profile presents more complex coverage questions.

Looking ahead, the W&I product is likely to remain an important feature of UK and European M&A. As market conditions remain unpredictable, the need for pragmatic solutions will only grow. The ability of strategic buyers to find and implement these solutions will distinguish them in competitive landscapes and create significant opportunities for value. In this environment, W&I insurance is increasingly best understood not as a standalone product, but as part of a broader risk-management toolkit that supports certainty, execution and valuation discipline.

1 PitchBook, ‘Public PE Titans Are Saying Goodbye to Software, Hello to AI’ https://pitchbook.com/news/articles/public-pe-titans-are-saying-goodbye-to-software-hello-to-ai

2 McKinsey & Company, Top M&A Trends 2026: Navigating a Rapidly Rebounding Market (2026) p 33 https://www.mckinsey.com/~/media/mckinsey/business%20functions/m%20and%20a/our%20insights/top%20m%20and%20a%20trends%202026/2026-m-and-a-trends-navigating-a-rapidly-rebounding-market.pdf