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RESEARCH AND BRIEFINGS

Use of Insurance for M&A Deals Continues to Grow in 2015

 


Demand for transactional risk insurance continued to grow during the first half of 2015, with an overall increase of 15% year-over-year in terms of limits placed by Marsh.

“The demand for transactional risk insurance on mergers and acquisitions (M&A) transactions continues to grow rapidly, as competition among acquirers continues to remain intense,” said Karen Beldy Torborg, global leader for Marsh’s Private Equity and M&A Services practice. “Dealmakers, both from the private equity and corporate space are increasingly using insurance capital to get deals over the line and we don’t see this trend subsiding anytime soon. This is true in the Americas, EMEA, and Asia-Pacific.”

The US experienced dramatic growth in demand from all sectors, on the back of a record year in 2014. In Europe, real estate deals continued to drive demand, and we’re seeing a trend for dealmakers to include title insurance as part of the transaction. Larger deal sizes and a greater acceptance of this insurance solution buoyed demand in Asia.

Private equity firms continue to be the heaviest users of transactional risk insurance as they seek ways to reduce indemnity requirements when buying and make clean exits when selling. Despite this historical trend, corporations have become more comfortable using transactional risk insurance. Companies in the US and Asia-Pacific and those that buy or sell companies regularly have become especially comfortable with transactional risk insurance.

Transactional risk insurance – including warranty and indemnity (W&I) or representations and warranties (R&W) insurance, tax liability, and other contingent liability solutions – is now widely available in most jurisdictions or geographies around the world and has become a common risk-mitigation tool for dealmakers. The growth in capacity and availability of this niche type of insurance is yet another example of insurers expanding from traditional property and casualty lines into more complex, solution-oriented, specialist classes of insurance.

*Please note the PDF report was produced by Marsh USA and is in US English.

"Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by Jardine Lloyd Thompson Pty Ltd (ABN 69 009 098 864, AFSL 226 827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions.

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