Global Transactional Risk Insurance Market More than Doubles in Three Years: Marsh
New York, February 26, 2014
Global demand for transactional risk insurance has grown substantially over the last three years, fueled by an increase in corporate, private equity, and infrastructure funds using insurance to protect their deals and gain a strategic advantage in negotiations, particularly in cross-border transactions, according to figures released today by Marsh.
The amount of transactional risk insurance placed by Marsh grew by 155% in the three years to 2013 – with year-on-year growth of 26% from 2012-2013. In addition to increased client demand, the insurance market has increased its appetite to underwrite these risks, particularly in emerging territories, Marsh also said.
According to research published today by Marsh’s Private Equity and M&A Services Practice, M&A Transactional Risk Solutions: Global Growth Special Edition, the limits of insurance placed by Marsh in 2013, compared to 2010, by geography were: Europe, the Middle East and Africa (EMEA), $2.74 billion ($1.5 billion); Asia Pacific, $1.03 billion ($114 million); and Americas, $1.34 billion ($395 million).
Marsh’s report notes that the growing utilization of transactional risk insurance is most pronounced in Germany, South Africa, and across Asia Pacific. Between 2010 and 2013, Marsh noted a 100% increase in policies bound for German transactions, while Asia Pacific experienced the greatest overall growth, with a 143% increase in the limits of insurance placed by Marsh since 2010.
Karen Beldy Torborg, Global Leader of Marsh’s Private Equity and M&A Services Practice, commented: “The transactional risk insurance market has rapidly evolved from being largely concentrated in Western Europe and the US in 2010, into the global industry it is today.
“Risk appetite is key to this growth. While many firms are looking beyond their own borders for mergers and acquisitions opportunities, the unfamiliarity associated with doing deals overseas means they are taking a much more cautious approach to warranty exposure. Transactional risk insurance solutions mitigate this risk.”
Marsh reports that falling premiums have also contributed to the growing popularity of representations and warranties insurance globally. For example, in EMEA the average premium rate was 1.55% of the limits purchased in 2013, down from 2.1% in 2010.
Ms. Beldy Torborg continued: “New entrants to the market, coupled with falling premiums, has fueled product innovation as insurers look for new ways to differentiate themselves from competitors and sustain their books of business. Clients are taking full advantage of this.”