Canadian M&A is finally thawing after a muted couple of years – but the risk profile of those deals is getting tougher just as transactional risk underwriters are being hit with more frequent and larger claims.
That’s the picture painted by Jordan Villiers Kluckow (pictured), head of Liberty Global Transaction Solutions (GTS), Canada, who said Canadian dealmakers have returned to market in 2025 with renewed appetite – and increasingly leaned on representations and warranties (R&W) insurance to get deals over the line.
“Canadian M&A activity has rebounded in 2025 after a slow start,” he said. “Deal value has been distorted by four large transactions, deal volume is down on previous years but still better than the slow start.” Technology remains the most active sector by volume, driven by mid-market SaaS and digital infrastructure deals, while energy and critical minerals dominate by value due to Canada’s role in the global energy transition, he added.
Private equity, mid‑market and cross‑border deals are at the heart of that shift. “Private equity firms, sitting on significant dry powder, are fueling mid-market activity and cross-border deals,” said Villiers Kluckow. “These dynamics are increasing demand for transactional risk insurance, especially representations and warranties coverage, as buyers and sellers seek certainty and cleaner exits in competitive processes.”
“Globally and in Canada, claims under representations and warranties policies are rising in both frequency and severity,” said Villiers Kluckow. Financial statement breaches remain the most common trigger, but recent data points to a growing share of claims tied to tax matters and compliance with laws.
Cyber and data-related issues are increasingly on the radar, particularly in the fast-moving technology and digital infrastructure segments that dominate Canadian deal volume. “Cyber-related exposures are also emerging as a concern, particularly in technology and data-driven deals, as ransomware and AI-enabled attacks increase,” he noted.
On the heavier end of the economy, regulatory-related claims – such as breaches of environmental or licensing obligations – are appearing more often in energy and infrastructure transactions. For underwriters, that combination of sectoral concentration, more complex risk and higher claims severity is pushing them to be more demanding on diligence, structure and pricing.
“These trends underscore the importance of robust diligence and tailored coverage, as insurers anticipate continued upward pressure on claims activity,” said Villiers Kluckow.
“In today’s environment, diligence challenges often center on regulatory and compliance risks,” Villiers Kluckow explained. For cross‑border transactions, foreign investment reviews and national security concerns – particularly in data‑heavy businesses – are adding complexity and delay, and can introduce risk factors that are difficult to quantify.
At the mid‑market level, he said he sees recurring weak spots that can easily become flashpoints at the underwriting table. Gaps in the quality of financial reporting, tax structuring issues or legacy exposures, and immature or poorly documented cybersecurity controls can all produce valuation friction, extended negotiations and tougher conversations around coverage terms and exclusions.
“Mid-market transactions frequently encounter gaps in financial reporting quality, tax structuring, and cybersecurity controls, which can lead to valuation friction or extended negotiations,” said Villiers Kluckow. At the same time, “buyers are also pushing harder on indemnity terms, creating tension around escrow requirements and survival periods.”
That tug-of-war over indemnity and escrow is precisely where transactional risk insurance is supposed to act as a bridge. “Transactional risk insurance is increasingly used to bridge these gaps, but early identification of regulatory and operational risks remains critical to avoid last-minute deal disruption,” he said.
Pressure from private equity is reinforcing many of these trends. With significant dry powder to deploy and intense competition for high‑quality assets, PE buyers are under pressure to move quickly and deliver “clean exits” for sellers.
For insurers, that often means being asked to take on more risk in a compressed timeframe, based on diligence that may be good – but not perfect – especially in mid‑market businesses where controls are still maturing.
Buyers and sellers are also more willing to use R&W insurance to reshape the risk allocation in a deal: reducing or eliminating escrows, shortening survival periods and pushing more unknowns into the insurance layer. That can be attractive commercially – but, against a backdrop of rising financial statement, tax and compliance claims, underwriters are increasingly selective about which deals they will back and on what terms.
In this environment, Villiers Kluckow said early, disciplined preparation is the single best way for clients and brokers to secure broader coverage and smoother underwriting.
“Early preparation is key,” he emphasized. Parties should come to market with clean, well-organized financials and a clear story around known risk areas – including tax exposures, cybersecurity controls and regulatory approvals – before approaching insurers.
He recommended several practical steps. First, deal parties should get the house in order by ensuring financial reporting is coherent and consistent, tax positions are understood, and core controls – especially cyber, data protection and key operational risks – are documented and tested. Second, they should map the regulatory landscape early. For cross‑border deals, clarity on foreign investment filings, national security reviews and sector‑specific approvals is critical. Third, they should bring advisors and underwriters in early. “Engaging experienced advisors and underwriters early can streamline the process and avoid surprises,” said Villiers Kluckow, particularly where there are known hairy issues that can be ring-fenced or priced appropriately rather than becoming last‑minute deal‑killers. Finally, they should time the underwriting process properly. “Buyers and sellers can also accelerate underwriting by sharing diligence reports promptly and waiting to engage in underwriting until transaction documents are in an advanced form,” he noted, adding that this reduces rework and renegotiation as deal terms evolve.
“These steps can help secure broader coverage and more competitive pricing in a market where terms may tighten as deal flow accelerates,” said Villiers Kluckow.
