The use of transactional risk insurance surged around the world in 2014, thanks to record demand in both mature and emerging markets from clients seeking to protect their corporate deals, according to a new Marsh report.
As before, private equity firms and other financial deal sponsors remained the biggest customers for this type of insurance, Marsh said in its Annual Transactional Risk Report 2014.
According to Marsh, the year saw a 36 percent jump in policies placed as well as a 51 percent surge in limits placed by Marsh. Specifically, limits placed for transactional risk insurance surpassed $7.7 billion in 2014, up from $5.1 billion in 2013, the report found.
What’s driving this?
March attributes the trend to record demand in mature M&A markets including the U.S. and the Nordic region. In Nordic countries in particular, transactional insurance deals grew 260 percent versus 2013.
But emerging markets are also more aware of transactional insurance and boosting their usage too.
“Emerging markets in particular continue to embrace the solution, as investors and sellers look to reduce policyholder risk,” Marsh said.
This type of coverage is now offered in Latin America and its use has grown in Asia. Marsh noted that it brokered the first locally issued transaction risk coverage in Malaysia, Mexico, the Philippines and Saudi Arabia in 2014.
Limits placed in Europe, the Middle East and Africa hit $3.9 billion in 2014, a 42 percent increase from the $2.7 billion placed in 2013, Marsh found. But the U.S. and Canada also experienced a huge boom in demand last year for transactional risk insurance as it was more widely used by groups including private equity firms, law firms, and other deal insiders, particularly in the middle market. Limits placed in the U.S. hit $2.7 billion in 2014, versus $1.3 billion in 2013 – a 103 percent increase, according to the report.
Karen Beldy Torborg, global leader of Marsh’s Private Equity and M&A Services Practice, said in prepared remarks that Marsh expects similar demand for transactional risk insurance in 2015.
Source: Marsh