Sources told this publication that EQT was looking to claim on a condition of an assets clause in its R&W policy on the deal, after the PE house found the condition of the infrastructure not to its expectations post deal.
The R&W market is braced for a substantial claim on the policy that could range from $700mn to as much as $1bn, according to sources. If the claim does indeed pay out, it has been suggested it will be the largest in R&W market history.
It is understood that Euclid Transactional leads the policy, which is brokered by Lockton. The exposure will, however, be spread across the US and London markets.
The news of the deal comes as claim activity begins to tick up in the R&W – also known as warranty and indemnity – space.
While this is in part due to the increased M&A activity since the pandemic, participants in the market are keeping a wary eye on claims development as rates trend downwards.
A July update from Euclid Transactional said that from January to July, the MGA received an average of 26 claims per month, a nearly 21% increase from the 21.5 per month notices in 2022 and nearly doubling the 14 averaged claims per month in 2021.
Meanwhile, a Woodruff Sawyer R&W claims update from July noted that 2023 has marked a significant increase in condition of assets claims.
“The rise in such claims is not yet a trend, but it is of particular interest to insurers given that these breaches have the potential for high exposure to loss,” the firm said in its update.
A condition of assets claim may not only involve the cost of the equipment, but also any ongoing costs associated with the loss of revenue. Energy and manufacturing sectors are at particular risk, Woodruff Sawyer noted.
EQT and Euclid did not respond to requests for comment. Lockton declined to comment.
