The COVID-19 pandemic has not led to a surge in “buyers remorse” claims in the mergers and acquisitions (M&A) market, but new trends are likely still emerging, Liberty Global Transaction Solutions says in its second annual briefing.

Business fundamentals changed rapidly amid the pandemic and due diligence was harder to undertake, leading to speculation that there might be an increase in claims.

Liberty GTS President Rowan Bamford says while that has not yet materialized, the environment has changed the nature of some previously well-understood risks, such as in travel, hotels and real estate.

“We expect new COVID-related claims trends to emerge in the next few years as a result,” he said.

The report finds large M&A insurance claims are being discovered and notified more quickly than in the past, with 52% of notifications in the first twelve months of policies being written in 2018-20, compared to 41% in 2015-17.

Generally, 57% of claim notifications were made in the first 12 months of the policy period last year, up from 48% in 2019, and claims of at least $US50 million ($69 million) showed a notable increase.

“The increasingly early notification of claims partly reflects the fact that many lawyers are beginning to carry out a post-deal review of the target business as a matter of course with the specific objective of identifying potential breaches for a possible claim,” Mr Bamford said.

“Claims processes for deals are now becoming ‘institutionalised’, and we see the results, although most important for our clients is the fact that our statistics show that claims made in the first year are the most likely to be paid.”

Accounting and financial issues make up 41% of high severity claims, with many of those involving stock control or revenue recognition issues.

Cyber claims, those relating to failed IT projects and claims around class-action wage disputes are increasing in frequency.

A number of high severity claims have involved “founder” sales, with some involving suspected fraud. Overall, the most common fraud involves management fabricating revenue to boost the bottom line.