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Private Equity

In recent years, global private equity firms have emerged as a significant force in the world of high finance. With buy-in from the high-net-worth individuals and funds they enlist in various ventures, they've made successful moves to take control of trillions in assets under management. Some project private equity holdings to reach $5 trillion or higher by 2025.

Operating in the realm of private equity can mean realizing great profit — but it also requires that you shoulder the responsibility of major risk. Market conditions can change quickly. The institutional shielding of your firm may not always insulate you and your partners from the financial consequences of ill-advised investment decisions.

With a team of over 250 globally-connected practitioners, Marsh provides insights to evaluate, facilitate, and close cross-border and domestic transactions, while managing buy- and sell-side risks. This helps buyers to differentiate their bids and sellers to exit with minimal warranty exposure.

Our private equity team has more than 25 years’ experience in the field. We work with alternative asset managers, private equity firms, infrastructure investors, and others in the sector to manage risk and properly safeguard assets. We also use our group purchasing programs to maximize buying power and lower costs as much as possible over the life of the investment and beyond.

Our specialists are driven to solving your insurance and risk management challenges by understanding, quantifying, and mitigating risk throughout your investment life cycle. From pre-acquisition, transaction, and integration solutions, to portfolio servicing and post-acquisition transactions, our specialists can help you enhance deal value, improve valuation outcomes, and achieve operational excellence across your portfolio.

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The private equity sector continues to face evolving risks, including:

  • Operational risks
  • Increased investor pressure related to environmental, social, and governance (ESG) factors
  • Cyber threats
  • Geopolitical risks

Developing talent management strategies that encourage technological capabilities

To contain costs, preserve liquidity, protect assets, and strengthen talent, private equity firms should take steps to optimize their insurance and risk mitigation strategies.

Insurers are becoming more aware of private equity risk issues and priorities. There is no "one-size-fits-all" coverage option. You must choose the protections you want for the businesses and other assets that comprise your portfolio.

However, several insurance solutions may be particularly beneficial to private equity firms, including:

  • M&A and transactional risk insurance: This facilitates transactions and transfers liabilities to the insurance market.
  • Representations and warranties insurance or warranty and indemnity insurance: This protects a buyer against a breach of the seller’s representations.
  • Tax insurance: This can help manage identified tax risks and any unexpected financial exposures of a deal as well as other contingent risks that could impact the success of a transaction.
  • Portfolio insurance solutions: These offer an aggregated approach to risk management across your portfolio.

A sophisticated broker can build tailored insurance policies specific to your risks, so you can execute deals with confidence and protect your portfolio for the long term.

From fundraising, acquisition, and asset management to divestment activities and exit stages, a strategically designed insurance portfolio program can help private equity firms achieve financial success.

Exploring these services can improve the value of a firm’s portfolio across the investment life cycle:

  • When raising capital: Comprehensive general partnership liability coverage can protect fund and investment professionals from inherent risks.
  • When deploying capital, pre- and post-acquisition: Risk and insurance due diligence can help avoid pitfalls, transactional risk solutions can enable deals to close, and post-acquisition integration support can ensure a smooth transition.
  • When managing capital: Employing risk optimization and loss cost reduction strategies during the ownership period may improve financial outcomes. Having dedicated claims advocacy resources can support a smooth claims process.
  • Upon exit: Vendor risk and insurance due diligence can uncover potential risks, reviewing seller-focused transactional risk insurance solutions can support a positive deal outcome, and IPO and SPAC coverage can support a smooth exit.

Using an aggregated approach to risk management through a portfolio purchasing insurance program can help control costs and manage volatility. By teaming with the right insurance advisor, private equity firms can take a holistic, coordinated approach to risk, which in turn can yield better outcomes.

Using a portfolio insurance purchasing platform not only provides centralized oversight of your entire portfolio, but also helps you better quantify and manage your portfolio risk – leading to cost savings, greater operational efficiency, and improved valuations upon exit.

The increasing financial power of private equity firms coincides with risks that are growing steadily by the day. It's critical for any organization operating in this field to obtain specialized coverage for its portfolio holdings.

In addition, your organization may face greater scrutiny — from the general public and government regulators — regarding its practices. Even if you are confident in the strength and security of your deals, unexpected legal, regulatory, and financial surprises could emerge.

By enlisting our private equity team to develop a tailored risk assessment, management, and transfer solution, you can submit bids or divest assets with greater confidence that your risks are being mitigated as much as possible.