Insurance broker and risk advisor Marsh, a business of Marsh McLennan, has published its 2024 Transactional Risk Insurance Year in Review report, examining developments in the transactional risk insurance market around the world over the past year.
With merger and acquisition (M&A) deal activity up eight per cent globally in 2024 relative to 2023’s 10-year low, they say notable activity was observed in the technology, healthcare and renewable energy sectors where dealmakers used transactional risk insurance at near-record levels.
Double-digit decreases in pricing
“Overall, the global transactional risk insurance market was generally favourable to buyers in 2024, with double-digit decreases in pricing for primary layers of coverage across all regions. Underwriting capacity remained ample globally,” they write. Claims in North America, meanwhile, increased by 20 per cent in 2024. “Favourable conditions could wane as insurers begin to seek price increases in response to increased claims activity,” they add.
That said, demand for transactional risk insurance increased across the globe, “driven by a growing recognition of its value in mitigating risks associated with complex transactions,” the report states. “Insureds increasingly sought deal protection through representations and warranties (R&W) and warranty and indemnity (W&I) insurance across various sectors, complemented by a significant increase in the use of tax insurance.”
Marsh also notes that for the second consecutive year, the firm closed more transactions on behalf of corporate insureds than for private equity firms, reflecting a shift in market dynamics as corporate buyers increasingly used the product to facilitate M&A activities.
Underwriting competition
In North America in 2024 they say favourable pricing and terms continued in the R&W insurance sector with underwriting competition counteracting rising demand. They also say since late 2022 it has been common for insurers to quote with few comments or exclusions, a trend which continued in 2024, resulting in generally more affordable policies with improved coverage. Tax insurance demand also surged, particularly in the renewable energy sector. Increased demand is not expected to alter current pricing or availability dynamics.
“The anticipated increase in North America M&A activity and a corresponding increase in demand for R&W insurance in 2025 is not expected to change the current insured-friendly rate environment in the short-to-medium term,” they write. “Although some insurers have signaled plans to continue to seek rate increases in 2025, robust competition in the North American R&W insurance underwriting landscape should hold down the level of increases.”
