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Cutting-edge uses of transactional risk insurance in evolving deal structures

Evolving private equity strategies are transforming transaction structures and increasing demand for specialist, tailored M&A insurance solutions.

06/03/2026 · 7 minute read

Evolving private equity strategies are transforming transaction structures and increasing demand for specialist, tailored M&A insurance solutions.  

For example, private credit funds are increasingly investing in alternative transaction structures, bringing new complexities and opportunities for preference share issuances. Meanwhile, secondary transactions have become a mainstream liquidity strategy for private equity firms. These developments require more than standard insurance solutions; they demand tailored mergers and acquisitions (M&A) insurance strategies designed to address unique challenges.

M&A insurance has also evolved to provide recourse where traditional warranties are unavailable or impractical, for example, in certain distressed or insolvency sales, take-private situations, and other transactions where sellers cannot or will not provide warranties. Solutions such as synthetic warranties and indemnities (W&I) insurance can help to support smoother execution in these deals.

Further, there is growing adoption of US-style representations and warranties insurance, which can offer broader coverage and a more streamlined process compared with traditional UK and European W&I coverage.

Successfully managing this diverse landscape requires deep knowledge, agile solutions, and strategic foresight to maximize value, enhance certainty, and accelerate deal execution. Marsh’s transactional risk specialists work closely with clients to provide insights, tools, and tailored insurance solutions that can be essential to success. Below, we explore some of the innovative uses of transactional risk insurance, how they are providing organizations with coverage for their risks, and how our team assists throughout the placement process.

Transactional risk insurance to cover warranties relating to preference share and non-ordinary share capital issuances

Despite current market turbulence, the global private credit market is expected to grow to US$5 trillion by 2029, with private credit funds increasingly investing in complex capital structures. A notable trend in the US and European markets is the rise in preference share issuances. These preference shares provide investors with downside protection through liquidation preferences and, in some cases, offer upside potential via conversion rights into ordinary shares. They often come with fixed or cumulative dividends, redemption rights, and are usually non-voting.

Preference shares are seen as a flexible financing tool, especially useful when sponsor-owned companies face limits on taking on more secure debt. Because preference shares are generally treated as equity, they can help to avoid breaching existing leverage or gearing covenants. They can also finance bolt-on acquisitions to help expand investment platforms without diluting ordinary shareholders. In these transactions, the company seeking investment typically provides a suite of business warranties to facilitate the issuance of preference shares, with the incoming investor’s corporate vehicle named as the insured.

Insuring preference share issuances presents unique challenges, requiring early engagement to manage underwriting complexity and to familiarize underwriters with the capital structure and valuation methodologies.

Our team of specialists leads these efforts by tailoring insurance policies for each deal. Since preference shares, by definition, rank senior to ordinary shares, we work with clients and underwriters to see that definitions of “loss” and other policy terms are used to enable the insurance to function as intended.

Working with UK and US transactional risk insurers, we offer innovative insurance solutions that cover the warranties related to preference share issuances. These transactional risk insurance policies can enable sponsors to complete transactions efficiently while minimizing their exposure to investment-related losses.

W&I becoming a mainstream liquidity tool for the secondaries market

The private equity secondaries market continues to evolve as a mainstream liquidity strategy for limited partners (LPs) and general partners (GPs), with record deal volumes in 2025 — US$106 billion in GP-led and US$120 billion in LP-led transactions.

In recent years, transactional risk insurance — especially W&I coverage — has become a mainstream structuring tool within the secondaries landscape.

For GP-led transactions, W&I insurance is increasingly used to reduce friction in liability negotiations between GPs and investors. For LP-led deals, W&I insurance provides recourse to investors where a GP is not standing behind the transaction.  

Insurers underwriting secondaries transactions have varying due diligence expectations. A standard secondaries warranty pack can often be covered on a fully knowledge-qualified basis, without due diligence, which will typically involve a shorter underwriting Q&A process. For unqualified cover, insurers will generally expect a deeper due diligence effort aligned with the subject matter of the warranties.

Alongside W&I, contingent risk and tax insurance policies are becoming standard tools in secondaries transactions. These are often used to cover historic tax exposures and litigation/regulatory issues.

In 2025, Marsh’s transactional risk team advised a leading global private equity sponsor on the largest GP-led secondary/continuation vehicle transaction in Europe. The transaction involved an enterprise value of approximately US$10 billion and we placed a syndicated W&I program of more than US$1 billion.

The rise of US-style representations and warranties cover

There has long been differentiation between the representations and warranties (R&W) insurance offered in North America and W&I insurance offered in the UK and the rest of the world.

The R&W offering in North America is characterized by generally wider coverage, and smoother processes, as well as often higher premium rates and policy retention levels.

Over the years, efforts to bridge this gap for US- and Canada-based purchasers have led to the development of “hybrid” policies. However, insurers’ cautious approach to these offerings occasionally affected coverage optimality.

Over the past 12 months, several key providers in the UK have introduced R&W policies underwritten from London with underwriting processes modeled on the US approach, offering R&W coverage for placements in both the UK and the rest of the world.

During 2025, Marsh’s transactional risk team in London saw:

  • More than US$26 billion in cumulative enterprise value for R&W placements during the year
  • Just under US$3 billion in limits placed
  • Placements across 16 different sectors
  • Sale and purchase agreements under seven different governing laws
  • A 2.5% average blended rate on line, compared to an average of 1.16% for W&I policies

Clients have expressed a preference for these placements, seeing R&W coverage generally as having advantages over W&I that include:

  • Fewer post-underwriting exclusions
  • Increased efficiency in policy form negotiations, which draw on law firm R&W precedents
  • Shorter turnaround times

Synthetic W&I insurance

Synthetic W&I insurance can assist in circumstances where the seller and/or management are unwilling or unable to provide warranties to the buyer. In this scenario, insurers will themselves “synthetically” provide the underlying sale warranties (relating to the target’s business and tax affairs) to the buyer.

The synthetic warranty suite is set out within a schedule on the insurance policy rather than within the primary transaction documents. This is often used in distressed or insolvent transactions and in public-to-private transactions.

To obtain synthetic W&I insurance, insurers generally require either the buyer or seller to conduct due diligence on the subject matter of warranties being sought, among others.

This type of policy is increasingly being used as a deal facilitator and value-accretive structuring tool. Buyers can obtain warranty protection backed by insurers where recourse may not have otherwise been available. Sellers can market a more attractive target business to buyers, potentially increasing valuation without needing to negotiate alternative forms of recourse.

Marsh recently advised the portfolio company of a leading financial institution in connection with its acquisition of a financially distressed target (via a solvent accelerated M&A process). As the sellers were only prepared to provide title and capacity warranties, Marsh placed a synthetic W&I policy that provided coverage for a comprehensive suite of business warranties, including financial and tax warranties.

Tailored insurance solutions are key to enhancing certainty and improving deal value

As transaction structures continue to evolve and grow more complex, the role of tailored transactional risk insurance is becoming even more critical. From preference share issuances and secondary transactions to the adoption of US-style R&W coverage and synthetic solutions, these tools are enabling sponsors and investors to better navigate uncertainty, unlock value, and execute deals with greater confidence.

Marsh’s transactional risk specialists work closely with clients to provide insights, tools, and tailored insurance solutions essential to success. Our team combines deep transactional knowledge, global market access, and innovative thinking to support clients across the full investment lifecycle. We collaborate with sponsors, investors, and their advisors to help structure tailored insurance solutions that address evolving risks, enhance deal certainty, and help to drive successful outcomes in an increasingly dynamic market.

 

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