‘Subdued’ M&A market opens opportunities to transactional risk insurers

Transactional risk insurers can take advantage of “subdued” M&A deal volumes by innovating and deploying their capacity in “wider” ways, said Leo Flindall, UK transactional risk co-leader at Marsh Specialty.

Flindall highlighted that, given the current M&A landscape, insurers could support a broader spectrum of transaction types with transactional risk insurance – including secondary and public-to-private (P2P), as well as administration processes.

There is also an opportunity to support broader transactional risk product types, such as tax insurance and specific risks insurance – including litigation, intellectual property (IP) risks and contractual disputes, for example.

Warranty and indemnity (W&I) insurance, in particular, can support a wider range of regions where the product is “less available but demand is growing significantly”, added Flindall.

These regions include the likes of Latin American (LATAM), Africa and Israel.

Transactional risk

Flindall’s comments build on Marsh’s Transactional risk insurance 2022: year in review report published last month (23 February 2023), which explained that transactional risk insurance had grown from “a once esoteric product” to become a ”mainstream feature” of M&A transactions worldwide.

Tax insurance – alongside W&I insurance and contingent cover – is encompassed by transactional risk insurance and protects insureds from potential tax liabilities that may arise following an acquisition.

Flindall expected the “transactional risk insurance market to grow further this year, with the products now being a key component of deals and insurers expanding their underwriting appetite to meet demand.”

Craig Schioppo, global head of transactional risk at Marsh Specialty, said: “Last year proved to be a challenging but resilient year for the transactional risk insurance market.

“Transactional risk insurance has, over the last five years in particular, gained major traction as a critical enabler for both buyers and sellers alike, as more organisations recognize its value in managing and protecting their deals.”

Marsh’s report added that demand for transactional risk insurance was expected to “remain robust in 2023 in the Europe, Middle East and Africa region”.