b'TABLE OF CONTENTSmore notifications. What seems certain, however, iswhether this is in fact a broader trend and, if so, that the generalized spike in deal flow has alreadywhat the contributory factors are, although it has led to, and will continue to cause, an increasedbeen posited that insurers are offering longer number of notifications.warranty periods, which afford policyholders a During the course of 2021, the principal subjectlonger period of time in which to uncover problems. areas for claims activity continued to be tax-related,The general increase in tax-related claims on W&I or accounting and financial statements-related, withpolicies (with the relevant warranties usually a notable increase in claims focusing on materialbenefitting from longer policy periods) is likely to contracts issues; none of these trends departedbe a factor here. from what we have seen in prior years. OneClaims severitythat is, the value of the potential interestingand pleasingfeature of the claimsexposure resulting from notified mattershas been landscape has been that the anticipated spike ofbroadly consistent throughout 2021. COVID-19-related claims is yet to materialize (and itTurning to sector-specific trends, the broad may not). That said, many of the material contractscategories of industrials and healthcare, together problems we have seen emerge have been,with energy and infrastructure, probably attracted tangentially at least, referable to COVID-19-relatedthe most activity in the W&I claims context (perhaps issues, notably in the context of supply chainas a result of material contracts-related issues disruptions. With particular regard to tax warranties,emerging from the pandemic), whilst it has been there has been a notable increase in the willingnessreported that, within the broad category of real of revenue authorities to pursue investigations intoestate, the volume of notifications appears to have tax-related matters, and this has been evident in thedeclined somewhat. number of notifications specifically related to breaches of these warranties.Some W&I underwriters have sought to firm up An interesting feature of the claims landscape overwordings, particularly for example in the context of the past year has been the timing within whichcyber-related issues, driven in large part by the notifications are being made. Recent years havespike in data breach and ransomware incidents over seen a general trend of notifications being madethe last two years. Similarly, higher premiums have sooner, for example within the first 18 monthsstarted to arrive. following policy inception. Again, this has commonlyIn terms of the year ahead, even if claims directly been attributed to growing familiarity with therelated to COVID-19 do not emerge in the numbers product, and the recognition of the importance ofmany have predicted, it is likely that the withdrawal notifying matters early. Some brokers haveof government support during the pandemic, most reported, however, that 2021 in fact saw a decline innotably in relation to the employee furlough notifications being made within the first 18 months,scheme, and the widely-anticipated high incidence with a significant increase in the number ofof fraud in relation thereto. Similarly, it is quite notifications made at a later time (i.e., more than 18possible that a significant number of target months after inception). It is not entirely clearbusinesses acquired during 2020 and 2021 took, and MAYER BROWN |39'