A new report unveils a surge in transactional risk solutions, including first-time exposure in overseas markets
The demand for transactional risk insurance broke records to reach a new high in 2014, according to a recent report issued by Marsh, a leader in risk management and brokerage.
The surge occurred both in established markets such as the US and Nordic countries, as well as emerging ones such as Malaysia, Mexico, the Philippines, and Saudi Arabia. The latter countries all engaged in policies for the first time, with hope of reducing cross-border risks.
Transactional risk was also introduced to Latin America, and saw greater use in Asia.
In addition, Marsh reports that global policies increased by 36% between 2013 and 2014, while limits rose by 51%.
The main drivers behind this upswing are warranty and indemnity, representations and warranties, and tax and contingent liability insurance
Researchers note that in the United States and Canada, law firms, private equity firms, and similar professionals are increasingly accepting of transactional risk insurance, and coverage is sought “by private equity sellers seeking a clean exit, along with buyers using transactional risk insurance to enhance their bid in auction scenarios.”
Globally, however, they found that in regions such as the Asia-Pacific, multinational transactions are rising as buyers obtain the insurance to buttress their deals.
Whatever the intent behind purchasing, there is no denying that transactional insurance grew rapidly in 2014.
“2014 was a landmark year for the use of this insurance solution. Record demand in mature M&A markets, which is testament to the efficacy of transactional risk insurance, combined with continued increasing usage in emerging markets, helped drive these historic results," said Karen Beldy Torborg, global leader of Marsh’s Private Equity and M&A Services Practice, in a statement. "We expect to see similar demand for transactional risk insurance in 2015."
