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M&A insurance demand rises, prices dip

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Demand for merger and acquisition risk cover surged last year, while pricing declined as more insurers competed for the business.

Global broker Marsh says it placed more than 700 transactional policies for clients, up nearly 28% on the previous year.

Limits placed jumped 38% to $US20.1 billion ($26.3 billion), with larger average deal sizes contributing to the increase.

More than 25 insurers offer transactional risk cover worldwide, with the number increasing as new providers seek growth outside traditional property and casualty lines. Increased competition contributed to average prices falling 13%, accelerating from a decline of about 2% the previous year.

Corporate buyers increasingly use transactional cover, once almost entirely the domain of private equity groups, and now represent half the policy buyers.

In the Pacific region, 72% of transactional insurance was bought by corporate buyers last year, up from 46%, while total limits placed by Marsh jumped 20% to $US750 million ($982 million). Transactional cover includes representations and warranties, tax indemnity insurance and contingent liability.

Globally, merger and acquisition activity remained “robust”, topping $US3 trillion ($3.9 trillion), Marsh says.