The US RWI market is recalibrating - 5 recommendations to navigate a potentially hardening W&I market.
Summary
The UK and European W&I market remains well capitalised and competitive. Nevertheless, there are modest indications that the current soft-market phase might be approaching a point of transition. As rates increase and claims frequency and severity climbs, the US RWI market is undergoing a firm recalibration that may prompt tighter European reinsurance appetite, capacity, and underwriting discipline. While we consider this to likely come in the form of a market correction, rather than a broader dislocation, terms could increasingly bifurcate, with premium assets and sophisticated processes continuing to secure competitive terms, with less prepared targets facing restrictions on coverage.
UK and European market today
Pricing: Standard transactions continue to benefit from intense competition among insurers. We anticipate any firming of rates will be selective and concentrated on complex assets or sectors that have shown a higher rate of claims, for example technology and healthcare/life sciences. For standard UK and European transactions, rates are currently around 0.8%-1.3%, depending on deal size, sector and the underlying risk profile.
Cover: Scope of cover is now aligned much more closely with the specific transaction risks, with due diligence and requested cover increasingly coordinated. We are seeing underwriters conduct a robust review on how diligence supports each warranty and expect this to continue.
Segmentation: Some insurers and capacity providers have adjusted their underwriting strategies or withdrawn from certain sectors or jurisdictions, while others have expanded capacity. We are seeing greater variation in appetite between insurers, with more selective underwriting on complex or higher-risk transactions. Recent claims data points to higher notification rates in parts of Southern Europe, including France and Iberia, as well as certain other European markets, which may lead to greater scrutiny on those risks.
Retentions and structures: Tipping-to-nil structures remain widely available, and nil-retention outcomes remain achievable on well-run processes and lower-risk assets. We are also seeing an increase in buyers requesting full or partial synthetic warranty suites, with insurers increasingly willing to cover legal risks beyond standard tax exposures.
Product convergence: A limited but growing number of insurers can now offer full US-style RWI on European transactions.
Claims analytics are reshaping underwriting
Insurers now have considerably more data available for analysis across their claims portfolios, insights from which are now feeding directly into underwriting guidelines, policy conditions, exclusions and pricing models. In practice this means:
Pricing and exclusions reflect where carriers have experienced losses.
Notification rates continue to rise as the class matures, however headline notifications can overstate loss, with many falling within the policy retention alongside tax-related notifications which are often precautionary.
Financial statements and tax warranties will continue to attract the closest scrutiny.
US RWI market recalibration
The US RWI market is correcting after loss-making years for some carriers and MGAs. This has largely been driven by an increase in claims severity, alongside a sustained uptick in claim frequency and long-tail loss notifications.
Some carriers have exited and others are repositioning capacity ahead of MGA binder and reinsurance renewals.
Premium rates have risen materially from the 2024 lows and are expected to keep climbing.
Retentions may edge up and underwriters are expected to tighten policy terms gradually.
Underwriters are likely to demand more rigorous diligence in the areas where severe losses cluster, notably financial statements and material contracts.
The International Underwriting Association (IUA) recently published an in-depth report analysing the structural and economic developments in the US RWI market, also directly addressing the future development and long-term sustainability of the market. Readers can access the full paper here.
Potential transmission to European market
The US and European markets share a connected ecosystem of reinsurance capital, carrier groups, and underlying loss drivers. While the immediate outlook for the UK and European market remains a ‘watch and wait’ scenario, we anticipate any transatlantic linkage impacting the UK and European market through four primary channels:
Reinsurance renewals:
Hardening US treaty outcomes directly influence how European carriers and MGAs are structured and supported. This tightening occurs even when European portfolios demonstrate stronger standalone performance.
Rate adequacy:
Given European pricing begins from a significantly lower baseline, we anticipate a steady, gradual firming rather than US-style step changes. The most pronounced upward movements will be concentrated in loss-prone sectors and volatile deal structures.
Underwriting scrutiny:
Carriers are enforcing heightened due diligence expectations. Consequently, transactions with superficial or thin diligence face an elevated risk of severe exclusions, narrow policy scopes, or qualified coverage.
Selective capacity withdrawal:
As global capacity providers rebalance their US exposures, many are trimming their European lines. This strategic consolidation will increasingly concentrate market support among a smaller, select group of premium carriers over time.
Despite these potential headwinds, key mitigating factors do remain. European pricing and retentions are structurally lower, claims expertise is steadily advancing, and the market continues to benefit from a deep pool of both established and new capacity.
5 recommendations to navigate a hardening market
Early engagement with the market: We advise getting non-binding indications before pricing the deal, not after. Early engagement typically translates to increased insurer choice and increased scope to shape terms, while competition among underwriters is still strong. Standard transactions are still benefiting from intense competition among insurers.
Aligning the warranty package with the policy: Engage with the broker to understand which warranties underwriters will cover and which are likely to attract exclusions, before the SPA is settled. Cover is becoming much more closely aligned with the specific transaction risks, with diligence and requested cover increasingly coordinated. A warranty package negotiated in isolation can mean avoidable exclusions later.
Focus on robust financial and tax diligence: Thin or late diligence in these areas is the most common route to qualified cover. High-quality reports remain the best lever to ensure broad cover and a smooth underwriting process. In addition, pay specific attention to known high-risk areas like tax compliance, material contract vulnerabilities, and intellectual property ownership, especially within loss-prone sectors such as technology or manufacturing.
Get ahead of the newer risk areas: Cyber security, data protection, AI, sanctions, export controls, ESG and geopolitical risks are increasingly central to underwriting, and in the defence sector, FDI screening and classified information are now routine. Addressing these in diligence ahead of going to market will help to avoid any last-minute exclusions.
Select an insurer on more than price: Insurers are feeding claims data back into underwriting guidelines, exclusions, and pricing models, so claims record and underwriting depth should now be a primary consideration. It is important to weigh claims handling, sector expertise and cross-border capability alongside rate and retention.
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Tan Pawar: Managing Director | tan.pawar@bmsgroup.com
Dean Andrews: Executive Director, Head of Tax & Contingent Liability | dean.andrews@bmsgroup.com
Matthew Gillam: Director and Head of Warranty & Indemnity | matthew.gillam@bmsgroup.com
Guy Wilmot | Director | guy.wilmot@bmsgroup.com
